Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Diwali Muharat Picks (click company name report for details)
The global economy is once again passing through turbulent weather in
terms of the growth trajectory. Soft economic data points coming out of
western economies (weak PMI readings breaching the critical level of 50
globally, discouraging consumer confidence retesting the 2008 lows and
stressed housing sector) coupled with the perplexing sovereign debt
crisis in the peripheral Euro zone has once again raised the odds of a
double dip recession in the troubled western economies. Hence, the
downgrade of US debt (July 2011) by the rating agencies was merely a
catalyst for the ruthless sell off that risky asset prices have witnessed post
the downgrade, further adding to the odds of a double dip. The impact
MSCI Developed Markets were down by 15% from July-September 2011
coupled with huge volatility.
Coming to emerging markets, especially India, the main concern leading
to the sell-off was the realignment of growth expectations as the EM
central bankers have been tightening to avoid a hard landing. India
remains no exception as the RBI has been ahead of the curve and raised
rates by 350 bps on 12 counts to tame spiralling price levels. Also, stalled
policy reforms from New Delhi have added fuel to the fire as we are
entering a moderation period wherein we expect growth rates to cool off
from 8.5% levels to 7-7.5% over the next couple of quarters. This, we
believe, is clearly reflected in the asset prices (stock markets) over the
previous months.
In the beginning of the year, in our strategy report we had put our
Bull/Base/Bear Case targets for the Sensex at 25451/23165/16924,
respectively, for December 2011. Though our bear case target has
materialised given global and local macro headwinds, we are
downgrading our Bull/Base/Bear Case targets further for March 2012 to
20190/18844/16310 levels, respectively. We estimate a base case
valuation of 18844 for the Sensex (14x FY13 EPS of | 1346). In case of
negative surprises wherein valuation multiples contract and future
earnings are ignored, we expect the Sensex to trade at 16310 (14x FY12
EPS of | 1165).
The main revision in our BSE Sensex target stems from the fact that we
have revised down our earnings for FY12E and FY13E by 6% and 5%,
respectively, and lowered our target multiple for the base case from 17x
to 14x .
We expect more of a time based correction and expect the markets to
oscillate in a broad trading range till the time reasonable clarity emerges
from the various local and global macro headwinds. In case of a negative
outlier event, the markets may fall further in the wake of panic selling.
However, we do not expect the markets to sustain at such levels. In such
an environment, timing the markets would become extremely difficult.
We believe any sharp cuts should be bought into from a three to five
years perspective. Buying is recommended in large caps and selective
quality midcaps.
On the flip side, the BSE Sensex can face further downside given there
appears some Black Swan in the global backdrop (bank failure in the Euro
area, default contagion in the peripheral Euro zone and policy failure,
probable oil shock or some unforeseen domestic political issues) that can
lead to debasement of P/E multiples as in 1992 (Harshad Mehta Scam),
1999-2000 (Ketan Parekh scam) and the most recent 2008 US crisis
wherein the multiples contracted to as low as 10-11x.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Diwali Muharat Picks (click company name report for details)
Bharti Airtel
Biocon
HDFC Bank
HPCL
ITC
CLICK links to below for MORE reports on:
The global economy is once again passing through turbulent weather in
terms of the growth trajectory. Soft economic data points coming out of
western economies (weak PMI readings breaching the critical level of 50
globally, discouraging consumer confidence retesting the 2008 lows and
stressed housing sector) coupled with the perplexing sovereign debt
crisis in the peripheral Euro zone has once again raised the odds of a
double dip recession in the troubled western economies. Hence, the
downgrade of US debt (July 2011) by the rating agencies was merely a
catalyst for the ruthless sell off that risky asset prices have witnessed post
the downgrade, further adding to the odds of a double dip. The impact
MSCI Developed Markets were down by 15% from July-September 2011
coupled with huge volatility.
Coming to emerging markets, especially India, the main concern leading
to the sell-off was the realignment of growth expectations as the EM
central bankers have been tightening to avoid a hard landing. India
remains no exception as the RBI has been ahead of the curve and raised
rates by 350 bps on 12 counts to tame spiralling price levels. Also, stalled
policy reforms from New Delhi have added fuel to the fire as we are
entering a moderation period wherein we expect growth rates to cool off
from 8.5% levels to 7-7.5% over the next couple of quarters. This, we
believe, is clearly reflected in the asset prices (stock markets) over the
previous months.
In the beginning of the year, in our strategy report we had put our
Bull/Base/Bear Case targets for the Sensex at 25451/23165/16924,
respectively, for December 2011. Though our bear case target has
materialised given global and local macro headwinds, we are
downgrading our Bull/Base/Bear Case targets further for March 2012 to
20190/18844/16310 levels, respectively. We estimate a base case
valuation of 18844 for the Sensex (14x FY13 EPS of | 1346). In case of
negative surprises wherein valuation multiples contract and future
earnings are ignored, we expect the Sensex to trade at 16310 (14x FY12
EPS of | 1165).
The main revision in our BSE Sensex target stems from the fact that we
have revised down our earnings for FY12E and FY13E by 6% and 5%,
respectively, and lowered our target multiple for the base case from 17x
to 14x .
We expect more of a time based correction and expect the markets to
oscillate in a broad trading range till the time reasonable clarity emerges
from the various local and global macro headwinds. In case of a negative
outlier event, the markets may fall further in the wake of panic selling.
However, we do not expect the markets to sustain at such levels. In such
an environment, timing the markets would become extremely difficult.
We believe any sharp cuts should be bought into from a three to five
years perspective. Buying is recommended in large caps and selective
quality midcaps.
On the flip side, the BSE Sensex can face further downside given there
appears some Black Swan in the global backdrop (bank failure in the Euro
area, default contagion in the peripheral Euro zone and policy failure,
probable oil shock or some unforeseen domestic political issues) that can
lead to debasement of P/E multiples as in 1992 (Harshad Mehta Scam),
1999-2000 (Ketan Parekh scam) and the most recent 2008 US crisis
wherein the multiples contracted to as low as 10-11x.
No comments:
Post a Comment