India strategy, top picks for December 2012: PLilladher
Prabhudas Lilladher has come out with its report on "India strategy & top ideas". Infosys, ICICI Bank, Wipro, Cairn India, Power Grid Corporation, Dr.Reddy's Laboratories, Adani Port & SEZ and Ranbaxy Laboratories are the stocks from large cap space
Prabhudas Lilladher has come out with its report on "India strategy & top ideas for December 2012". Infosys, ICICI Bank, Wipro, Cairn India, Power Grid Corporation, Dr.Reddy's Laboratories, Adani Port & SEZ and Ranbaxy Laboratories are the stocks from large cap space however, YES Bank, Mahindra & Mahindra Financial Services, Bharat Electronics, IPCA, Torrent Pharmaceuticals, Amara Raja Batteries, Mahindra Holidays & Resorts India, Persistent Systems and NIIT Technologies are the stocks from mid-cap space.
US: Economy sending mixed signals
US: Fears of looming fiscal cliff weigh on the markets
Bailout of Greece and banks in Spain amidst no sign of an imminent turnaround in Euro zone
Euro zone: Softening of bond yields after rescue packages for Greece and Spanish banks
Chinese economy: Early signs of bottoming out
Falling growth, elevated inflation and fears of fiscal slippage amidst disappointing 2G auction
Rating outlook: Cautious yet concerned
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 9.9% to Rs 373.2 in FY13 and 16.0% to Rs 432.9 in FY14
At 5,901 levels as on December 5, 2012, Nifty is trading at 15.8x FY13E earnings and 13.6x FY14E earnings. The last ten-year average for Nifty’s one-year forward multiple is 13.6x. Thus, Nifty is currently trading at 13.9x (i.e. at a marginal premium of 2.6%) its ten-year average of one-year forward multiple (based on Dec’13 Nifty estimated EPS of Rs 423.0)
MSCI India is currently trading at a premium of 35% to MSCI Asia (ex-Japan). Last ten-year’s-average premium at which India has traded is 34%
Although concerns on India’s falling GDP growth and slippage in fiscal deficit is weighing in on the minds of investors, it must be seen in the context of most challenging global environment with fears of recession looming large in the US if the dreaded fiscal cliff is not averted, sovereign debt crisis & the resultant banking crisis hemorrhaging growth in Euro-zone and nascent yet shaky recovery in China. As a result, despite macroeconomic headwinds, foreign funds have poured in nearly Rs 899.5bn from the start of the calendar year.
The government’s firm resolve in standing steadfast on pushing through the much needed reforms like opening up of various capital starved sectors like Aviation, Multi-brand Retail etc. sends a strong signal that it is committed to attract long-term foreign capital. This is clearly evident in the passsage of multi-brand retail proposal in the Lower House of parliament (Lok Sabha). What is now needed is a credible and transparent fiscal consolidation roadmap that spells out how various subsidies will be contained. Adoption of loose fiscal policy with an eye on the national elections slated in 2014 is the biggest risk to achieve fiscal consolidation and would be closely watched by the credit rating agencies and institutional investor community.
As Indian valuations are in line from historical perspective, we believe, the markets will find support at 5600 levels. On the upside markets can move upto to 6200 levels
Infosys, ICICI Bank, Wipro, Cairn India, Power Grid Corporation, Dr.Reddy's Laboratories, Adani Port & SEZ, Ranbaxy Laboratories
YES Bank, Mahindra & Mahindra Financial Services, Bharat Electronics, IPCA, Torrent Pharmaceuticals, Amara Raja Batteries, Mahindra Holidays & Resorts India, Persistent Systems, NIIT Technologies
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To read the full report click on the attachment