India Stock Gains May Be Capped, Mirae Asset Says

(Bloomberg) -- India’s stock gains may be capped next quarter as accelerating inflation and the withdrawal of some government stimulus measures weigh on equities, according to Mirae Asset Global Investment. Returns for the whole of 2010 will be “muted” compared with this year, said Rahul Chadha, 34, who manages $1.5 billion in stocks as Mirae’s head of Indian equities. The benchmark Sensitive index has climbed 77 percent this year, set for its best annual performance since 1991 on expectations the election victory of Prime Minister Manmohan Singh’s Congress Party will accelerate economic reforms.Policy makers in India are considering whether they can keep interest rates at record lows without fanning inflation after wholesale food prices surged the most in 11 years in the week ended Nov. 28. Overseas investors poured $16.5 billion into Indian equities this year, approaching the record $17.2 billion bought in 2007.

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