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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Angel Broking, TOP PICKS:: Click on links for details of each company:
Opportune times
Indian markets have underperformed almost all major global markets in
CY2011YTD due to twin macro-concerns of high inflation and interest rates. The
fall has been exacerbated recently by the uncertain global financial environment
following the downgrade of US' long-term credit rating. US' economic recovery has
slowed further in the past few quarters and unemployment levels have persisted above
9% levels, triggering fears of a double-dip recession as well as slowdown in global
growth. Eurozone countries also continue to be plagued by sovereign debt crisis concerns.
However, as compared to emerging market peers, in our view Indian equities are
on a firmer footing due to the following factors:
Relatively lower dependence on exports: India’s GDP remains relatively less
dependent on exports (exports to GDP of ~20% vs. 25-50% for other EMEs), hence,
the impact of any global slowdown on the Indian economy is likely to be on the
lower side. Also, while the US dollar may depreciate gradually against current
account surplus countries, India's relatively higher current account deficit as a
percentage of GDP vis-à-vis peers is likely to limit the extent of appreciation in INR
vis-à-vis the USD, improving the relative competitiveness of Indian exports over a
period of time.
Slowdown in global growth likely to keep commodity and energy prices under
pressure - Materially positive for the Indian economy: Fears of a double-dip recession
in the US, sovereign debt crisis concerns in Eurozone countries and the overall
slower global growth expectations have cooled off commodity and energy prices
considerably. The Reuters CRB index has come off 2011 YTD peaks by ~14% and
WTI crude oil prices have also declined substantially by ~14% in the past 15 days
and are off 2011 YTD peak by ~25%. Rising global growth concerns and declining
fiscal stimulus measures in developed economies are likely to keep commodity and
energy prices in check. The positive implications for the Indian economy are
a) reducing the fiscal deficit, b) cooling inflationary pressures and c) potentially
ending the prolonged monetary tightening stance of the RBI.
Slower domestic growth may also prompt an end to monetary tightening: Apart
from reduced inflationary pressures, the slowdown in domestic growth and
heightened risks in the global macro environment are expected to lead to an end to
the monetary policy tightening stance. Domestic growth has already slowed, as
evident from the slowing GDP growth rates, tepid IIP growth, marginal growth in
gross domestic capital formation and demand deceleration evident in declining
vehicle sales and cement dispatches growth rates. Also, liquidity conditions in the
system have eased off considerably with deposit mobilisation gaining strong traction
and declining credit offtake, indicating that broader interest rates are also close to
peak in our view.
Valuations provide the comfort: As compared to high valuations prevailing in the
second half of 2007, we believe current valuations have built in a reasonable
margin of safety. The Sensex is currently trading at 13.7x one-year forward earnings
as compared to average multiple of 15.7x since March 2004. Though we may
witness near-term volatility based on global news flow especially from the US
and Eurozone countries, any corrections should be used as an opportunity to
accumulate, in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Angel Broking, TOP PICKS:: Click on links for details of each company:
Axis Bank (TP: `1,648/ Upside: 33%)
ICICI Bank ( TP: `1,281/ Upside: 35%)
Infosys (TP: `3,200/ Upside: 30%)
L&T ( TP: `1,946/ Upside:19%)
Lupin ( TP: `593/ Upside: 33%)
Mphasis ( TP: `482/ Upside: 17%)
RIL (TP: `1,180/ Upside:51%)Mahindra Satyam ( TP: `89/ Upside:20%)
Tata Steel ( TP: `799/ Upside:56%)
United Phosphorous ( TP: `208/ Upside:37%)
Finolex Cables ( TP: `59/ Upside:44%)
Greenply (TP: `311/ Upside: 47%)
Jagran Prakashan ( TP: `148/ Upside:32%)
Relaxo Footwears ( TP: `399/ Upside: 41%)
Tata Sponge Iron ( TP: `429/ Upside: 38%)
Opportune times
Indian markets have underperformed almost all major global markets in
CY2011YTD due to twin macro-concerns of high inflation and interest rates. The
fall has been exacerbated recently by the uncertain global financial environment
following the downgrade of US' long-term credit rating. US' economic recovery has
slowed further in the past few quarters and unemployment levels have persisted above
9% levels, triggering fears of a double-dip recession as well as slowdown in global
growth. Eurozone countries also continue to be plagued by sovereign debt crisis concerns.
However, as compared to emerging market peers, in our view Indian equities are
on a firmer footing due to the following factors:
Relatively lower dependence on exports: India’s GDP remains relatively less
dependent on exports (exports to GDP of ~20% vs. 25-50% for other EMEs), hence,
the impact of any global slowdown on the Indian economy is likely to be on the
lower side. Also, while the US dollar may depreciate gradually against current
account surplus countries, India's relatively higher current account deficit as a
percentage of GDP vis-à-vis peers is likely to limit the extent of appreciation in INR
vis-à-vis the USD, improving the relative competitiveness of Indian exports over a
period of time.
Slowdown in global growth likely to keep commodity and energy prices under
pressure - Materially positive for the Indian economy: Fears of a double-dip recession
in the US, sovereign debt crisis concerns in Eurozone countries and the overall
slower global growth expectations have cooled off commodity and energy prices
considerably. The Reuters CRB index has come off 2011 YTD peaks by ~14% and
WTI crude oil prices have also declined substantially by ~14% in the past 15 days
and are off 2011 YTD peak by ~25%. Rising global growth concerns and declining
fiscal stimulus measures in developed economies are likely to keep commodity and
energy prices in check. The positive implications for the Indian economy are
a) reducing the fiscal deficit, b) cooling inflationary pressures and c) potentially
ending the prolonged monetary tightening stance of the RBI.
Slower domestic growth may also prompt an end to monetary tightening: Apart
from reduced inflationary pressures, the slowdown in domestic growth and
heightened risks in the global macro environment are expected to lead to an end to
the monetary policy tightening stance. Domestic growth has already slowed, as
evident from the slowing GDP growth rates, tepid IIP growth, marginal growth in
gross domestic capital formation and demand deceleration evident in declining
vehicle sales and cement dispatches growth rates. Also, liquidity conditions in the
system have eased off considerably with deposit mobilisation gaining strong traction
and declining credit offtake, indicating that broader interest rates are also close to
peak in our view.
Valuations provide the comfort: As compared to high valuations prevailing in the
second half of 2007, we believe current valuations have built in a reasonable
margin of safety. The Sensex is currently trading at 13.7x one-year forward earnings
as compared to average multiple of 15.7x since March 2004. Though we may
witness near-term volatility based on global news flow especially from the US
and Eurozone countries, any corrections should be used as an opportunity to
accumulate, in our view.
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