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India Equity Research Reports, IPO and Stock News
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http://www.kotaksecurities.com/pdf/dmb/MorningInsight02032012.pdf
MARKET STRATEGY
Indian markets sustained the momentum gathered in the previous month,
for most part of February 2012. The positive global cues and anticipation of
further liquidity flows due to easing in Europe, kept sentiments positive.
Expectations of a softer interest rate regime going ahead in India also
helped sustain the momentum. However, the rally was snapped by rising oil
prices, a lower-than-expected 3Q GDP number and likely risk aversion at
higher levels.
US and European markets traded firm, led by optimism related to the Greece
bailout, 2nd tranche of LTRO and encouraging economic news from US.
ECB's second offering in the form of long term refinancing operation (LTRO
II) of 530bn euros in 3-year auction came in line with expectations.
On the policy side, government is addressing issues related to power sector
and has formed a separate committee headed by Prime Minister's Principal
Secretary. Reforms which had taken a backseat due to lack of political
consensus and election schedule in various states are likely to be taken up
after state election results. The auction of Government's part stake in ONGC
will release some funds for the Government and ease the fiscal deficit.
Going ahead, we remain positive on the medium-to-long term prospects of
the market. We expect the Government to re-initiate the reforms process
with urgency. We also believe that, interest rates will moderate in FY13.
However, in the intermediate term, the markets may have to negotiate
roadblocks. The optimism on reforms initiatives in the budget and post that,
may be tempered temporarily, if there is an unfavourable outcome of the
state elections. Moreover, the high crude prices may not result in an
immediate rate cut. These factors may lead to a pullback for the markets.
Developments in US and Eurozone also need to be watched closely as they
can drive FII flows.
Valuations have moved up from the lower end of the long-term range for
the benchmark indices. We continue to recommend a bottoms-up approach
with a medium to long term view. One should use dips to accumulate
stocks of companies having ethical managements and strong balance sheets
across sectors like IT, Banking, Media, Logistics, Capital Goods and
Infrastructure sectors.
Recommendation
Markets have been witnessing a rally since January led by revival in FII inflows, decline in inflation and expectations of interest rate cut from RBI. However, spiraling oil
prices, slowdown in GDP growth and likely risk aversion at relatively higher valuations snapped the gains.
Going ahead, we remain positive on the medium-to-long term prospects of the market. We expect the Government to re-initiate the reforms process with urgency. We
also believe that, interest rates will moderate in FY13. However, in the intermediate
term, the markets may have to negotiate roadblocks. The optimism on reforms initiatives in the budget and post that, may be tempered temporarily, if there is an
unfavourable outcome of the state elections. Moreover, the high crude prices may
not result in an immediate rate cut. These factors may lead to a pullback for the
markets. Developments in US and Eurozone also need to be watched closely as they
can drive FII flows.
Valuations have moved up from the lower end of the long-term range for the benchmark indices. We continue to recommend a bottoms-up approach with a medium to
long term view. One should use dips to accumulate stocks of companies having ethical managements and strong balance sheets across sectors like IT, Banking, Media,
Logistics, Capital Goods and Infrastructure sectors.
Preferred picks
Sector Stocks
Automobiles Bajaj Auto, TVS Motors
Banking HDFC Bank, ICICI Bank, Bank of Baroda
Construction IRB Infra, Unity Infra
Engineering L&T, Cummins, BEL, Bajaj Electricals
Information Technology Infosys, TCS, KPIT, NIIT Tech
Logistics & Transportation Gateway Distriparks, Mundra Port, Arshiya International
Media HT Media
NBFC IDFC, M&M Financial Services
Oil & Gas Cairn India, IGL
Real Estate Phoenix Mills
Source: Kotak Securities - Private Client Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight02032012.pdf
MARKET STRATEGY
Indian markets sustained the momentum gathered in the previous month,
for most part of February 2012. The positive global cues and anticipation of
further liquidity flows due to easing in Europe, kept sentiments positive.
Expectations of a softer interest rate regime going ahead in India also
helped sustain the momentum. However, the rally was snapped by rising oil
prices, a lower-than-expected 3Q GDP number and likely risk aversion at
higher levels.
US and European markets traded firm, led by optimism related to the Greece
bailout, 2nd tranche of LTRO and encouraging economic news from US.
ECB's second offering in the form of long term refinancing operation (LTRO
II) of 530bn euros in 3-year auction came in line with expectations.
On the policy side, government is addressing issues related to power sector
and has formed a separate committee headed by Prime Minister's Principal
Secretary. Reforms which had taken a backseat due to lack of political
consensus and election schedule in various states are likely to be taken up
after state election results. The auction of Government's part stake in ONGC
will release some funds for the Government and ease the fiscal deficit.
Going ahead, we remain positive on the medium-to-long term prospects of
the market. We expect the Government to re-initiate the reforms process
with urgency. We also believe that, interest rates will moderate in FY13.
However, in the intermediate term, the markets may have to negotiate
roadblocks. The optimism on reforms initiatives in the budget and post that,
may be tempered temporarily, if there is an unfavourable outcome of the
state elections. Moreover, the high crude prices may not result in an
immediate rate cut. These factors may lead to a pullback for the markets.
Developments in US and Eurozone also need to be watched closely as they
can drive FII flows.
Valuations have moved up from the lower end of the long-term range for
the benchmark indices. We continue to recommend a bottoms-up approach
with a medium to long term view. One should use dips to accumulate
stocks of companies having ethical managements and strong balance sheets
across sectors like IT, Banking, Media, Logistics, Capital Goods and
Infrastructure sectors.
Recommendation
Markets have been witnessing a rally since January led by revival in FII inflows, decline in inflation and expectations of interest rate cut from RBI. However, spiraling oil
prices, slowdown in GDP growth and likely risk aversion at relatively higher valuations snapped the gains.
Going ahead, we remain positive on the medium-to-long term prospects of the market. We expect the Government to re-initiate the reforms process with urgency. We
also believe that, interest rates will moderate in FY13. However, in the intermediate
term, the markets may have to negotiate roadblocks. The optimism on reforms initiatives in the budget and post that, may be tempered temporarily, if there is an
unfavourable outcome of the state elections. Moreover, the high crude prices may
not result in an immediate rate cut. These factors may lead to a pullback for the
markets. Developments in US and Eurozone also need to be watched closely as they
can drive FII flows.
Valuations have moved up from the lower end of the long-term range for the benchmark indices. We continue to recommend a bottoms-up approach with a medium to
long term view. One should use dips to accumulate stocks of companies having ethical managements and strong balance sheets across sectors like IT, Banking, Media,
Logistics, Capital Goods and Infrastructure sectors.
Preferred picks
Sector Stocks
Automobiles Bajaj Auto, TVS Motors
Banking HDFC Bank, ICICI Bank, Bank of Baroda
Construction IRB Infra, Unity Infra
Engineering L&T, Cummins, BEL, Bajaj Electricals
Information Technology Infosys, TCS, KPIT, NIIT Tech
Logistics & Transportation Gateway Distriparks, Mundra Port, Arshiya International
Media HT Media
NBFC IDFC, M&M Financial Services
Oil & Gas Cairn India, IGL
Real Estate Phoenix Mills
Source: Kotak Securities - Private Client Research
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