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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We believe risk aversion is the highest it has been in a decade
except in the two months post the ‘Lehman moment’ (Fig 1).
Given that such a catastrophe is not a certainty, further de-risking
for the market may be unlikely. Notwithstanding the recent
bounce, taking risks selectively could yield healthy returns.
● To calculate our risk index, we ascribed risk weights to gearing,
governance, rate sensitivity and earnings and stock price volatility.
As macro-economic uncertainty is still ahead of us, markets may
still fall further, but material outperformance of low-risk stocks and
sectors may be behind us.
● We therefore focus on relative valuations, especially within
sectors. We screened for stocks that have borne the brunt of risk
aversion despite healthy fundamentals (JSPL, RIL, Axis
Bank, Crompton Greaves): the risk-reward in these stocks is now
attractive despite the moves last week.
● Conversely, there are stocks that have significantly outperformed
their sectors despite weak trends in consensus est (Tata Steel,
Kotak Bank, Power Grid, Petronet LNG, HUL and ACC)
High risk aversion in the market
We ascribed risk weights to gearing, governance, rate sensitivity, and
earnings and stock price volatility, and discovered that risk aversion is
the highest it has been in a decade except in the two months post the
‘Lehman moment’. Given that such a catastrophe is not a certainty,
further de-risking for the market may be unlikely. This does not rule
out further declines for the market. However, notwithstanding the
recent bounce, taking risks selectively could yield healthy returns.
Macroeconomic uncertainties continue:
We continue to believe that the period of uncertainty is ahead of us
and not behind us. The problems of sovereign debt in Europe,
potential recessions in US/EU, a possible hard landing in China and
continuing high inflation and slowing growth in India are yet unsolved.
It is unwise, therefore, to aggressively add risk to the portfolio or to
drastically change portfolio weights. Yet, sharp price movements
provide opportunities to both buy and sell stocks.
Buy ‘risky but cheap’, trim sector outperformers
We focus on relative valuations, especially within sectors. We
screened for stocks that have borne the brunt of risk aversion despite
healthy fundamentals (JSPL, RIL, Axis Bank, Crompton Greaves).
The risk-reward in these stocks is now attractive despite the moves
last week. Conversely, there are stocks that have significantly
outperformed their sectors despite weak trends in consensus
estimates (Tata Steel, Kotak Mahindra, Power Grid, Petronet LNG,
HUL and ACC)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We believe risk aversion is the highest it has been in a decade
except in the two months post the ‘Lehman moment’ (Fig 1).
Given that such a catastrophe is not a certainty, further de-risking
for the market may be unlikely. Notwithstanding the recent
bounce, taking risks selectively could yield healthy returns.
● To calculate our risk index, we ascribed risk weights to gearing,
governance, rate sensitivity and earnings and stock price volatility.
As macro-economic uncertainty is still ahead of us, markets may
still fall further, but material outperformance of low-risk stocks and
sectors may be behind us.
● We therefore focus on relative valuations, especially within
sectors. We screened for stocks that have borne the brunt of risk
aversion despite healthy fundamentals (JSPL, RIL, Axis
Bank, Crompton Greaves): the risk-reward in these stocks is now
attractive despite the moves last week.
● Conversely, there are stocks that have significantly outperformed
their sectors despite weak trends in consensus est (Tata Steel,
Kotak Bank, Power Grid, Petronet LNG, HUL and ACC)
High risk aversion in the market
We ascribed risk weights to gearing, governance, rate sensitivity, and
earnings and stock price volatility, and discovered that risk aversion is
the highest it has been in a decade except in the two months post the
‘Lehman moment’. Given that such a catastrophe is not a certainty,
further de-risking for the market may be unlikely. This does not rule
out further declines for the market. However, notwithstanding the
recent bounce, taking risks selectively could yield healthy returns.
Macroeconomic uncertainties continue:
We continue to believe that the period of uncertainty is ahead of us
and not behind us. The problems of sovereign debt in Europe,
potential recessions in US/EU, a possible hard landing in China and
continuing high inflation and slowing growth in India are yet unsolved.
It is unwise, therefore, to aggressively add risk to the portfolio or to
drastically change portfolio weights. Yet, sharp price movements
provide opportunities to both buy and sell stocks.
Buy ‘risky but cheap’, trim sector outperformers
We focus on relative valuations, especially within sectors. We
screened for stocks that have borne the brunt of risk aversion despite
healthy fundamentals (JSPL, RIL, Axis Bank, Crompton Greaves).
The risk-reward in these stocks is now attractive despite the moves
last week. Conversely, there are stocks that have significantly
outperformed their sectors despite weak trends in consensus
estimates (Tata Steel, Kotak Mahindra, Power Grid, Petronet LNG,
HUL and ACC)
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