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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pessimism waning?
Once again our analysts are expecting a poor earnings season (4th in a row)
where we hardly have any estimate upgrades for FY12 but a lot of
downgrades. However, the wave of FY12 earnings downgrades has reduced
with concentration of downgrades restricted to banking, automobiles, capital
goods and construction. Technology sector witnessed material upgrades for
currency impact. Interestingly, looking into FY13, we find a dichotomy in some
sectors where we find analysts expecting good earnings growth but a weak/
bleak outlook barring a few sectors. Apart from consumer and cement,
surprisingly we have a positive FY13 outlook for interest rate sensitive sectors
such as Autos and Engineering & Construction and Utilities.
The final trough before the recovery
With 4QFY12 promising plenty of negative news flow from India and Europe,
our Sensex target of 14,500 remains in play in Jan-Feb 2012. However, from
March onwards, we see the situation improving for the Indian equity market
thanks to a reversal in the RBI’s monetary policy stance, significant monetary
easing in the West and a semblance of order returning to New Delhi’s
policymaking. On a 12-month horizon, we see the Sensex moving towards 18,000.
Investment implications
We reiterate our faith in “Good & Clean 3.0: Battleships”. Since its launch on
19th Oct- 2011, this portfolio has outperformed the BSE500 by 408bps on a
free float market cap basis.
High Conviction recommendations
BUYs: Tata Motors, HCL Tech, UltraTech, Bank of Baroda, Manappuram,
Torrent Power, EIL, TTK Prestige, ITC, VST, Petronet LNG
SELLs: Wipro, Axis Bank, SBI, Dabur, LICHF
Europe, our Sensex target of 14,500 remains in play in the first two months
of CY12. However, from March onwards, we see the situation improving for
the Indian equity market, thanks to a reversal in the RBI’s monetary policy
stance, significant monetary easing in the West and a semblance of order
returning to New Delhi’s policymaking. On a 12-month basis, we see the
Sensex moving towards 18,000.
Sensex 14,500 remains in play in Q1CY12 …
The first two months of CY12 will be a challenging period for the Indian market for
three reasons. First, the 3QFY12 results season promises to be anything but
cheerful and is likely to result in consensus’ FY13 EPS estimates being pulled back
further by around 3% points. Second with key state elections being rescheduled to
end by March 4, 2012, policy chaos is likely to persist over January-February
2012. Third, Europe is set for a tricky couple of months with: (a) Italy and Spain
likely to auction US$180bn of sovereign debt from January 12, 2012 onwards; (b)
European banks must report to their central banks by January 20, 2012 as to how
they will get their core tier 1 ratio to 9%; and (c) The 17 Eurozone countries will
attempt to get their respective Parliaments to approve the December 9, 2011
intergovernmental agreement by March 2012.
Hence in the opening 2-3 months of the calendar year, our longstanding Sensex
14,500 target remains very much in play.
… but over CY2012, the Sensex should veer towards 18,000
From March 2012 onwards we see the tide swinging in India’s favour. First, with
the counting of votes for the State elections drawing to a close on March 4, 2012
and with the UPA administration realizing that it is in the last chance saloon, we
expect to see more decisive and more reformist policies from the Government
(including retail FDI) in the Budget session that is likely to open in mid-March.
Second, with economic growth waning, core inflation (33% weightage) is likely to
ease and presuming no further advances in global commodity prices, WPI inflation
in India is likely to moderate thus triggering RBI rate cuts from March 2012. Third,
with the Eurozone heading for a recession, which could slow down the nascent
American recovery as well, we expect serious monetary easing (including QE) from
the ECB, the Federal Reserve and the Bank of England. In totality, we expect this
easing to be comparable with what we saw in the months after the collapse of
Lehman in CY08.
Hence over a 12-month period, we see a semblance of normalcy returning to the
Indian market. Multiplying our FY13 EPS estimate of `1,160 (0.1% above our long
standing FY12 estimate of `1,159: see pg 18) with a forward P/E of 15.5x (in line
with India’s long term average) gives us a 12-month Sensex target of 18,000.
Stock specific implications
As you would expect, we reiterate our faith in Good & Clean 3.0: Battleships. Since
its launch on October 19, 2011 this portfolio has outperformed the BSE500 by
377bps in terms of market capitalization and by 429bps on an equal weight basis.
Our overall family of ‘Good & Clean’ portfolios has outperformed the market by
over 13% points since launch in mid-March last year.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pessimism waning?
Once again our analysts are expecting a poor earnings season (4th in a row)
where we hardly have any estimate upgrades for FY12 but a lot of
downgrades. However, the wave of FY12 earnings downgrades has reduced
with concentration of downgrades restricted to banking, automobiles, capital
goods and construction. Technology sector witnessed material upgrades for
currency impact. Interestingly, looking into FY13, we find a dichotomy in some
sectors where we find analysts expecting good earnings growth but a weak/
bleak outlook barring a few sectors. Apart from consumer and cement,
surprisingly we have a positive FY13 outlook for interest rate sensitive sectors
such as Autos and Engineering & Construction and Utilities.
The final trough before the recovery
With 4QFY12 promising plenty of negative news flow from India and Europe,
our Sensex target of 14,500 remains in play in Jan-Feb 2012. However, from
March onwards, we see the situation improving for the Indian equity market
thanks to a reversal in the RBI’s monetary policy stance, significant monetary
easing in the West and a semblance of order returning to New Delhi’s
policymaking. On a 12-month horizon, we see the Sensex moving towards 18,000.
Investment implications
We reiterate our faith in “Good & Clean 3.0: Battleships”. Since its launch on
19th Oct- 2011, this portfolio has outperformed the BSE500 by 408bps on a
free float market cap basis.
High Conviction recommendations
BUYs: Tata Motors, HCL Tech, UltraTech, Bank of Baroda, Manappuram,
Torrent Power, EIL, TTK Prestige, ITC, VST, Petronet LNG
SELLs: Wipro, Axis Bank, SBI, Dabur, LICHF
The final trough before the recovery
With 4QFY12 promising plenty of negative newsflow from India andEurope, our Sensex target of 14,500 remains in play in the first two months
of CY12. However, from March onwards, we see the situation improving for
the Indian equity market, thanks to a reversal in the RBI’s monetary policy
stance, significant monetary easing in the West and a semblance of order
returning to New Delhi’s policymaking. On a 12-month basis, we see the
Sensex moving towards 18,000.
Sensex 14,500 remains in play in Q1CY12 …
The first two months of CY12 will be a challenging period for the Indian market for
three reasons. First, the 3QFY12 results season promises to be anything but
cheerful and is likely to result in consensus’ FY13 EPS estimates being pulled back
further by around 3% points. Second with key state elections being rescheduled to
end by March 4, 2012, policy chaos is likely to persist over January-February
2012. Third, Europe is set for a tricky couple of months with: (a) Italy and Spain
likely to auction US$180bn of sovereign debt from January 12, 2012 onwards; (b)
European banks must report to their central banks by January 20, 2012 as to how
they will get their core tier 1 ratio to 9%; and (c) The 17 Eurozone countries will
attempt to get their respective Parliaments to approve the December 9, 2011
intergovernmental agreement by March 2012.
Hence in the opening 2-3 months of the calendar year, our longstanding Sensex
14,500 target remains very much in play.
… but over CY2012, the Sensex should veer towards 18,000
From March 2012 onwards we see the tide swinging in India’s favour. First, with
the counting of votes for the State elections drawing to a close on March 4, 2012
and with the UPA administration realizing that it is in the last chance saloon, we
expect to see more decisive and more reformist policies from the Government
(including retail FDI) in the Budget session that is likely to open in mid-March.
Second, with economic growth waning, core inflation (33% weightage) is likely to
ease and presuming no further advances in global commodity prices, WPI inflation
in India is likely to moderate thus triggering RBI rate cuts from March 2012. Third,
with the Eurozone heading for a recession, which could slow down the nascent
American recovery as well, we expect serious monetary easing (including QE) from
the ECB, the Federal Reserve and the Bank of England. In totality, we expect this
easing to be comparable with what we saw in the months after the collapse of
Lehman in CY08.
Hence over a 12-month period, we see a semblance of normalcy returning to the
Indian market. Multiplying our FY13 EPS estimate of `1,160 (0.1% above our long
standing FY12 estimate of `1,159: see pg 18) with a forward P/E of 15.5x (in line
with India’s long term average) gives us a 12-month Sensex target of 18,000.
Stock specific implications
As you would expect, we reiterate our faith in Good & Clean 3.0: Battleships. Since
its launch on October 19, 2011 this portfolio has outperformed the BSE500 by
377bps in terms of market capitalization and by 429bps on an equal weight basis.
Our overall family of ‘Good & Clean’ portfolios has outperformed the market by
over 13% points since launch in mid-March last year.
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