Special Market Commentary
. Sanjeev Zarbade- Senior Vice President, Research | |
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The Sensex opened strongly on the back of positive Asian market cues. Reports indicated that the PM is meeting to discuss expediting infrastructure projects that have been delayed due to various reasons. Following this, Infrastructure stocks were among the major gainers. Apart from this, hopes of rate cut by the Reserve Bank of India has fuelled rally in bank and auto stocks. Market sentiment was further boosted by firm European markets. European equities are rallying today on hopes that policy makers at ECB will unveil fresh monetary stimulus measures when it meets today.
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| Next Week : The next week is expected to be an eventful one with data expected on April IIP and Inflation. This would be followed by the RBI monetary policy meeting on June 18. For global equities, the major market moving event in the short-term is the elections in Greece. Notwithstanding the today’s rally, risk aversion may prevail in global equities in the short term, we opine. | |
However, we note that risk-reward ratio is turning favourable for equities. Current valuations at ~12.5-13x are at a discount to the median range of 15x one year forward earnings. Amidst the gloom, there is a silver lining in terms of softening of crude prices from its highs. For indian equities, this is a crucial time for the market, as we believe that, the Government will likely act on tough reforms. The markets will keenly await action on the same.
We maintain that, reforms are important pre-requisite for the markets to stabilize and move up. In the current scenario, we recommend a bottoms-up approach and would advise investors to 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. Initiation of reforms may make us take a more constructive long-term view of the markets. | |
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