INVESTORS are punishing stocks in India more than in any of the other largest emerging markets as government measures to curb inflation cut profits at companies from Steel Authority of India Ltd to Grasim Industries Ltd.
Steel Authority, India's second-largest producer of the metal, last week was valued at nine times projected earnings, 41 percent less than at the start of 2008. The ratio for Grasim, the nation's third-biggest cement maker, dropped 32 percent to 8.5.
Price-to-earnings for the entire Indian market slumped 33 percent as foreign investors turned net sellers for the first time since at least 2000, more than in Brazil, Russia and China, where they fell 10 percent to 31 percent, data compiled by Bloomberg News show.
Investors are showing less faith in India ?? even after the benchmark Sensitive Index jumped 13 percent from its March low ?? because companies produce fewer commodities than Russia and Brazil, the nation's gross domestic product is growing slower than China's, and a scarcity of coal, oil and iron ore drove inflation to a three-year high.
"I'm just not finding a compelling reason to be in India," said Uri Landesman, who oversees US$5.5 billion as head of global growth and international equities at ING Groep NV's asset management unit in New York.
"With little natural resources given their population, inflation might be a problem, and the government might end up quashing some of the GDP growth."
India is the only so-called BRIC market where Landesman, 46, isn't invested after he sold the last of his Indian stocks at the start of the month. He declined to name them.
Pulled out
BRIC is an acronym coined by Goldman Sachs Group Inc in November 2001 to encompass four emerging markets it predicted would join the US and Japan as the world's biggest economies by 2050.
India is also the only BRIC nation where economic growth is forecast to slow for a second consecutive year in 2008, according to the Washington-based International Monetary Fund.
The Sensitive Index, known also as the Sensex, yesterday lost 0.2 percent to 16,709.21.
Overseas fund managers pulled a net US$3.03 billion out of Indian equities in the first three months of the year, Bloomberg data show.
That's the first time foreign investors have been net sellers on a quarterly basis since the data were first compiled in 2000.
"There are no triggers really for the markets to move up," said Mahesh Patil, who helps manage US$8.8 billion at Birla Sun Life Asset Management in Mumbai.
The declines have made stocks too cheap for some investors to pass up. Prudential ICICI Asset Management Co, India's biggest money manager, and Merrill Lynch & Co's local management unit are among those betting on India's plan to spend US$1 trillion this decade on roads, railways and airports.