Rally has more legs,:: Goldman Sachs

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India Weekly Kickstart
Portfolio Strategy Research
Rally has more legs, NIFTY posts its seventh straight week of gains (+3.4% wow)
 CNX Public Sector Banks (+8.6%) and CNX Infra (+6.3%) were the best performers wow.
 Ytd foreign inflows of US$4.4 bn in cash equities and US$3.5 bn in debt, as of Feb 14 2012.
 The INR remained stable at around 49 to the US$.
 So far, Q3FY12 earnings surprise, relative to consensus expectations, is -17% for CNX500 companies.
Overview
Banks, autos and infra sectors gained sharply this
week after January WPI inflation declined from
7.5% yoy in December to 6.6% yoy (vs. consensus
expectations of 6.7% yoy). More importantly, core
inflation declined, raising hopes of a repo rate cut
by the RBI on March 15. Gains, however, were
capped this week due to persistent delays in
securing a deal in Greece. Ytd, the NIFTY has
gained 20.3%, driven primarily by strong foreign
inflows, improving global macro data and a
relaxation in Euro area financial risks.
NIFTY price performance
Source: NSE, DataStream, Goldman Sachs Global ECS Research
Foreign Flows
The divergence between foreign and domestic
flows into cash equities continues, with FIIs
buying US$ 727 mn and DIIs selling US$ 424 mn
wow (as of close of Feb 14, 2012).
Valuation and earnings sentiment
MSCI India is trading above its long-term average,
at 14.2x forward earnings. Telcos had the weakest
earnings sentiment (-32%) wow.
Commodities
Commodities lost 0.5% wow. Copper (-2.4%) fell,
while Crude spiked (+3.5%) on Iranian concerns.
3QFY12 Earnings results
Ranbaxy Labs (Feb 23).
Focus
FII ownership at 15.6% as of Dec 2011