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Investment banker Goldman Sachs, which invited the Government’s ire over its report upgrading Indian equities on hopes of Narendra Modi’s victory in the 2014 general elections, has said it stands by its report.
Commerce and Industry Minister Anand Sharma had described such reports as ‘coloured’, ‘influenced’ and most ‘inappropriate and objectionable.’ The report, ‘ Modi-fying our view: Raise India to Market weight ’, was released on November 5.
In a statement, Goldman Sachs explained that part of its role as a securities firm is to provide objective, impartial and independent research that explains to investors the fundamental reasons driving market sentiment and direction, including relevant political factors.
“Our Asia-Pacific Portfolio Strategy report dated November 5 contains neither political bias nor any political opinion by Goldman Sachs or its analysts. It simply notes that investor sentiment is being influenced by party politics. We stand by that assertion and by our research,” said Edward Naylor, Head of Corporate Communications (Asia Pacific), Goldman Sachs.
The report, while raising the investment stance, listed ‘Politics are trumping economics’ as one of the main reasons for its view.
Currently, the macro challenges that India faces in terms of external and fiscal imbalances, high inflation and tight monetary policy are being dominated by expectation of political change, specifically that the BJP-led National Democratic Alliances (NDA) could win in the election.
“Equity investors tend to view the BJP as business-friendly, and the BJP’s Prime Ministerial candidate Narendra Modi as an agent of change,” it mentioned.
Taking cues from various opinion polls predicting a good show by the BJP-led NDA, the report said, “Even though the actual general election outcome is uncertain, the market could trade this favourably over the next two quarters, which argue for modifying our stance.”
Govt sees red
This irked the Government. “We surely would not be entertaining prescriptive approaches or prescriptions from those who are totally disconnected. Any prescription would amount to insulting the collective wisdom of 800 million voters. Do we tell other countries what their voters should decide? Respect democracy and respect the country,” the Commerce Minister told reporters.
Sharma is confident that such reports cannot influence voters. “People have wisdom and maturity and the report will have no impact on general elections due next year,” he said. Goldman Sachs India CEO Bunty Bohra said, “It was not his (author’s) views of the political climate, but his views on how the market was… Research is independent, and it is not like it’s my view. It is the research department independently saying what’s going to happen,” he said at an event in Mumbai.
The report revised its end-2014 target for Nifty to 6,900 points, nearly 10 per cent more than the current levels and a 14.5 times forward price-to-earnings ratio.
Bohra said, “He is not saying sky is the limit. He is reiterating different micro and macro factors being transmitted into pricing of index. That’s pretty fair sense.”
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