Months after IL&FS collapsed, India’s markets are on a strong run

IN OCTOBER, SENTIMENT on India’s financial markets was bleak. The previous month Infrastructure Leasing and Financial Services (IL&FS), a Mumbai-based lender with scores of subsidiaries, had defaulted on a series of loans. Stockmarket indices fell sharply (see chart). Investors worried not only that the firm’s losses would directly harm other institutions, but also that similar problems might be lurking in other lenders.

Then the government stepped in. The management was replaced, and state-controlled entities ensured that other non-bank lenders had enough liquidity to enable credit markets to function. From a low point on October 26th, financial markets resumed a rise that, notwithstanding several reversals and a lull in recent days, has seen dramatic gains in the past decade. Late last month the major indices, including the Bombay Stock Exchange’s Sensex, which includes 30 companies, and a broader index of 500 companies, flirted with the heights they reached before the IL&FS scare—even though American sanctions on Iran pushed up the price of oil, India’s biggest import.

Looking lively

Crucial to the rally have been foreign buyers, whose activities are tracked and reported by local exchanges. Their importance is a consequence of the odd ownership structure of Indian companies. More than...

via The Economist: Finance and economics Business Feeds

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