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Modi quietly getting on with business; correction seen:CLSA

According to CLSA, a decision on the auction of coal blocks following the recent Supreme Court judgement will be a major test of Modi’s leadership

The News International Team

Brokerage house CLSA’s newsletter Greed & Fear expects Prime Minister Narendra Modi to decide on the coal blocks auction and gas price revision once the assembly election in Maharashtra is out of the way.

“(We) hope and expect Modi to make decisions on this issue once a near term political event is out of the way. With 48 national electoral seats, or 9% of the total, Maharashtra is the second-most politically important state,” writes Greed & fear.

CLSA disagrees with the gradually growing perception that the government is slow in taking the tough decisions required to revive the economy.

“Despite claims in some quarters that he (Modi) is not living up to expectations, all the evidence is that he is quietly getting on with business while, sensibly, not being distracted by excessive interaction with the media,” the newsletter says.

“Positive signals already include a dramatic change in the work habits of civil servants in Delhi, improvements in the project clearance process as well as encouraging initiatives, be it promoting opening of bank accounts or amending labour laws,” the newsletter says.

According to CLSA, a decision on the auction of coal blocks following the recent Supreme Court judgement will be a major test of Modi’s leadership.

“The critical issue is now how quickly the government auctions the blocs again and the way it does so given India’s obvious need for power. Given that the outlook for coal is nothing like as bullish as it was four years ago with the international coal prices down by about 45 percent since early 2011, a renewed auction is only going to work if the government is realistic about pricing,” the CLSA newsletter says.

Greed & fear expects a period of “corrective consolidation” in Indian equities, after the 33 percent jump in benchmark indices since February this year.

CLSA has forecast Sensex EPS growth of 12 percent for this fiscal and 20 percent for FY16.

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