Moneycontrol
Mar 12, 2013 02:42 PM IST | Source: Moneycontrol.com

India strategy, top 22 stock ideas: Prabhudas Lilladher

P Lilladher has come out with its report on "India strategy & top ideas". The research firm expects the market to trade in a band between 5600-6200. A large current account deficit would act as a drag on the currency limiting RBI‘s ability to reduce interest rates aggressively & this may act as a headwind for the equity markets, the report said.

 
 
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Prabhudas Lilladher has come out with its report on "India strategy & top ideas". The research firm expects the market to trade in a band between 5600 and 6200. A large current account deficit would act as a drag on the currency limiting RBI’s ability to reduce interest rates aggressively and this may act as a headwind for the equity markets, the report said.


Benign global liquidity & supportive domestic policy environment ranged against galloping current account, large supply of paper and fair valuation.


Upmove to be earnings-upgrade driven


Global Macro



  • US: Economy on the mend
  •  US: Ultra-loose monetary policy looks likely to persist for some time
  • Europe: Record unemployment, contracting GDPs & squabbling between austerity v/s growth continues …
  • Europe: Political gridlock in Italy and credit downgrade in the UK
  • China: Focus on shifting gears from export-dependent investment-led growth to domestic consumption
  • Japan: New BOJ Governor Toes ‘Abenomics’- To do ‘whatever it takes’ to fight deflation

Indian Economy



  • India: Decade-low qtrly growth, cooling WPI (except food), falling exports and rapidly slowing consumption
  • India: Plunging savings & corporate capex, massive rise of stalled projects, drying up of new investment projects-All eyes on CCI
  • Budget: A bold gambit on revival of growth, Key Legislative reforms needed to stimulate growth, Galloping CAD-the biggest worry

Indian Markets



  • Markets: Limited room for rate cuts, large supply of paper and hope for continuance of reforms
  • After showing an anemic growth of 0.6% in FY12 (Rs 339.6) over FY11 (Rs 337.8), we expect free float Nifty EPS to rise 8.8% to Rs 369.5 in FY13 and 17.2% to Rs 432.9 in FY14 . The earnings downgrade cycle still continues as evidenced in a 2.2% fall in our estimates of FY13 EPS from Rs 378 on Feb 7, 2013 to Rs 369.5 now.
  • At 5,863 levels as on March 7,2013, Nifty is trading at 15.9x FY13E earnings and 13.5x FY14E earnings. The last ten-year average for Nifty’s one-year forward multiple is 13.6x. Thus, Nifty is currently trading in line with its ten year average.
  • MSCI India is currently trading at a premium of 27% to MSCI Asia (ex-Japan). Last ten-year’s-average premium at which India has traded is 34%
  • We expect any further upside will be less re-rating driven and more earnings-upgrade driven.  Relief in the form of fall albeit at a slower pace in interest rates and hopes of continuance of benign commodity prices ( propelled by no large scale liquidity-driven up move and weakish global demand environment) and moderate pick-up in demand due to slightly better growth prospects in FY14 would underpin any earnings upgrade.
  • We expect the market to trade in a band between 5600 and 6200. A large current account deficit would act as a drag on the currency limiting RBI’s ability to reduce interest rates aggressively and this may act as a headwind for the equity markets. On the positives, a strong-willed government resolutely committed to the path of fiscal consolidation, reviving growth through policy enablers to kick start the investment cycle and creating a more-welcoming policy environment for foreign investments both through the FII and FDI route would act as strong tailwinds for the equity markets.

Top Picks


Large Cap: ITC, ICICI Bank, NTPC, Wipro, Tata Motors, Larsen & Toubro, Axis Bank, Cairn India, Hindustan Zinc, DLF, Maruti Suzuki, Adani Port & SEZ, NHPC, IDFC, Shree Cement


Mid-Cap: Petronet LNG, Bharat Electronics, Federal Bank, Jammu & Kashmir Bank, United Phosphorus, Apollo Tyres, NIIT Technologies


Institutional holding more than 40% in Indian cos


Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

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