FUND VIEW - SocGen can't rule out India market correction

FUND VIEW - SocGen can't rule out India market correction

Source: Reuters, India
Mon Feb 19, 2007 10:46 AM IST

Societe Generale Asset Management won't be surprised to see a correction in India's stock markets given high price-earning multiples, but continues to sell the country to investors for medium and long-term returns, its chief said.

Alain Clot, group chairman and chief executive officer of the French fund house, told Reuters any such correction would be short-lived and would offer international investors a sound opportunity to buy into Indian stocks.

"We are bullish. We are long (on) India... if you think three months, it is a different story but if you think medium term, it is a nice satisfactory sound investment theme," he said on Thursday.
India's stock markets have seen a three-year bull run as the economy has grown at over 8 percent annually, driven by high domestic consumption and exports.

The benchmark stock index rose 42 percent in 2005, 47 percent in 2006 and 4 percent so far in 2007, leaving investors cautious over the potential for sustained returns.

Clot said the sharp rise in price earning ratios in India were being driven by strong corporate profits, but also by speculation in some stocks. "One cannot exclude a correction takes place in India in '07," he said.

However, the strong earnings growth would continue, as it was being fueled by an expanding middle-class as well as robust exports, while many other countries had just one of those two engines of growth, he said.


"Corporate profits will remain quite high in '07-'08 and will be the main engine and incidentally, the one we prefer because it is a much sounder one than the pure multiple effect," he said.

Societe Generale has a mutual fund joint venture with India's largest bank, State Bank of India. SBI Funds Management Pvt. Ltd. manages assets worth 180 billion rupees ($4.08 billion) serving 3.5 million investors.
Societe Generale also has an offshore fund worth $350 million focussed on India and Clot said it was set to grow to over $2 billion in five years.

"India is one of the main theme of diversification for international investors," he said.

He also saw investment opportunities in infrastructure and all sectors catering to the middle-class.
Societe Generale manages $450 billion worth of investors' money in 32 countries including $44 billion in Asia.