Indian shares drop in March quarter

Indian shares posted a decline in the March quarter, its first such fall since December 2008, which also made it rank as the worst performing major market in Asia, hurt by sticky inflation and corruption scandals. But investors believe things could get better from here.
Dealers say the worst may be behind them, as shares have gained 9.1 percent in March, their highest monthly rise since September 2010. Foreign institutional investors (FIIs) have bought $1.3 billion in Indian equities this month, after pulling out a net $2.2 billion in the first two months. The 30-share BSE index closed 0.8 percent or 155.04 points higher at 19,445.22, its eighth straight day of gains and its longest winning streak in at least two years, with 23 of its components advancing. The index has declined 5.2 percent in the quarter, as foreign funds pulled out a net $900 million from Indian stocks.
"I think things are looking up from here. The market should post positive returns in June quarter,' said Rakesh Rawal, head of private wealth management at brokerage Anand Rathi. Rawal expects March-quarter earnings to be "healthy", and said the guidance for fiscal year 2012 will provide more cues. "FIIs obviously cannot ignore India. There are very few countries with this kind of growth. They were bound to return."
Real estate has been the worst performing sector in this quarter, with the sector index tumbling more than 18 percent as rising interest rates and high prices dented demand. The banking sector index fared better than the other sectors and was down only 0.6 percent this quarter, outperforming the broader market, on optimism surrounding India's economic growth story.
Anand Rathi's Rawal expects banking, technology, consumer goods and infrastructure sectors to drive the market in the June quarter. He said he would avoid telecoms stocks for now, as fierce competition and corruption scandal weigh. Alleged corruption in a 2007-08 telecoms licence allocation has damaged confidence in the ruling Congress government, led to calls for the resignation of Prime Minister Manmohan Singh and worried investors in Asia's third-largest economy. The oil and gas sector also did not interest Rawal due to a lack of clarity on policy issues.