MARKET STRATEGY-April 2012 : Kotak Securities PDF link

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http://www.kotaksecurities.com/pdf/dmb/MorningInsight02042012.pdf

MARKET STRATEGY
Indian markets underperformed its developed market peers in March. As
against a gain of 2.0% for the Dow, the Sensex lost 2.0% for the month.
Despite the launch of LTRO II, FII flow lost momentum in March. While the
Finance Minister was lauded for being realistic in his budgetary targets, the
market response was lukewarm. In fact, the selling pressure intensified
post-budget.
Industrial production for January surprised on the upside with 6.8% growth
from 2.5% growth in December (revised upwards from 1.8%). However, the
slowdown is confirmed by the cumulative growth during Apr-Jan FY12 at
4% vs. 8.3% last year. On the inflation front, February headline number
edged up marginally to 6.95% over January. Given the upside risks to
inflation, the RBI chose to keep repo rate unchanged, which was in line
with expectations.
US markets consolidated its gains during March led by improving strength
of its economy. For the first time in market history, the S&P, Nasdaq and
Dow closed above 1,400, 3,000 and 13,000 respectively. In the Eurozone, the
focus was on Greece as it concluded a debt-swap deal (sharp cut in their
private bond holdings) with private bond holders. This was a precondition
from the ECB before Greece sought its second bailout package to avert a
default.
Going ahead, we remain positive on the medium-to-long term prospects of
the market. However, a lot depends on policy support from the government
without which the economic growth may continue to lose steam.
Valuations have moved up from the lower end of the long-term range for
the benchmark indices. We expect the markets to remain range-bound in the
short-to-medium term and believe that, a bottoms-up approach will be most
suitable. 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.