Market Strategy 2011 : Sensex target of 23165 for 2011: ICICI Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Market Outlook 2011
	The year CY10 is best characterised as a progressive recovery in developing countries and just a recovery in the developed world. CY11 should again see a stronger but lopsided economic growth. The divergence is likely to be quite marked this year as well in terms of economic growth rates, policy responses, interest rates, inflation and other challenges all of which are likely to get transmitted into the performances of equity indices across countries as it did in CY10. We believe it is quite unlikely that we may see a reversal in divergences in performance of economic and various asset classes reverting anytime soon. The US and Europe region would continue liquidity induced revival hopes with BRIC brigade trying to attain a fine balance between maintaining healthy growth amid liquidity and commodity influenced issues such as inflation, currency volatility, etc.
	We expect the CY11 Indian equity performance to be growth induced and would mirror the trajectory of economic and corporate growth. We expect sectors levered to the consumption theme to continue finding favour and infra/capex related participation likely to be back-ended as elevated interest rates, inflation, commodity prices and tight liquidity would mute the confidence during the first half of CY11 despite compelling arguments in terms of need for infrastructure creation and valuations.
	We do not expect a de-rating of global confidence in India. Hence, we expect the Sensex to grow in line with earnings CAGR of 21% over FY10-12E EPS to 23165 levels (17x weighted average of FY12-13 EPS of 1,363, 16% upside). In our bear case, we expect the Sensex to find comfort at 16924 levels (14x FY12E EPS of 1,209, 15% downside), which could emanate from events such as fading of the US growth outlook, no respite on Euro zone worries, spike in commodities and geopolitical tensions. Also, persistent domestic corporate governance issues may take the sheen off India's image as an investment destination in the near term.
	Axis Bank, TCS, GAIL, Oil India, HCL Tech, L&T and, Lupin among large caps and Aurobindo Pharma, Balrampur Chini, Hindustan Zinc, Natco Pharma and Escorts among midcaps are our preferred picks for 2011.