FY13 Sensex band at 18K-19K, QE3 won't aid India: StanChart

In an interview to CNBC-TV18, Rahul Singh, Head of Equity Research, Standard Chartered Securities warns that the government will need to take executive decisions in June-July else Indian market will only face risk. According to him, the Sensex is likely to be in the range of 18000-19000 in FY13.

Singh is also worried that India may not outperform even if Fed resorts to quantitative easing (QE3).

However, he feels that it is not yet time to ring the warning bells as fourth quarter corporate earnings have been mixed. "There have been some big disappointment, there have been some surprises but on the aggregate it has still been pretty much inline. Nothing to swing the needle one way or the other for the market," he added.

Singh prefers Petronet LNG and GSPL among gas utilities. He also feels fundamentals of RIL  is likely to be lacklustre for the next two years.

Among the private banks, he likes ICICI Bank , Yes Bank and Bank of Baroda . According to Singh, SBI 's asset quality may surprsie in the fourth quarter of FY12.

Here is an edited transcript of his comments. Also watch the accompanying videos.

Q: We are still early in earning season but what have you made of the preliminary trends? How are you feeling about earnings performance itself?

A: The result season has been pretty much similar to the previous one. It has been a mixed bag. Even within sectors, we have seen huge divergence, case in point being IT services. So in India, the result seasons for the past few quarters have been a mixed bag and we don’t see any difference this time. It is still very early.

We still have some largecaps yet to report. If you look at the aggregate numbers, there have been some big disappointment and some surprises but on the aggregate it has still been pretty much in inline. There is nothing to swing the needle one way or the other for the markets.

Q: Some of your peers have been expressing greater disillusionment about the course of the market for the next six months both in terms of how much the macro concerns have alleviated, individual stock levels and of course other issues like the currency. Would you say there is a higher risk now that we are headed for some kind of de-rating threat in the second half of the year?

A: Yes, I would like to without getting into the technical side of it. If you just step back a little bit and look at the fundamentals, the valuations move up primarily for three reasons, one is the risk free rate, the risk premium for India as well as the medium-term earnings growth outlook. On all those three counts there has been some setbacks starting with the risk free rate where even the rate cuts have not moved in the ten year G Sec yields as much down as was expected.