Don't wait for triggers, stay invested, says RBS Asia Sec

Parul Saini, executive director at RBS Asia Securities feels inflation will undershoot the Reserve Bank's forecast of 7% by March.

Food inflation, a key driver of broader price pressure, has fallen dramatically in recent weeks even as manufacturing and fuel price inflation remain elevated. However, the recent tumble in the rupee has complicated the RBI's inflation-fighting by making imports of fuel and other items more expensive. Saini expects a cash reserve ratio cut on January 24 when the RBI will meet to discuss its credit policy. "Overall, I expect 150 bps in rate cuts this year," he adds. According to Saini, the biggest consensus view seems to be that the market will give us buying opportunity post elections. But, he says, if everybody is positioned from that perspective, it will be quite unlikely that one will get that buying opportunity. "If you look at valuations too, they seem to be pretty reasonable right now, around 12 times forward earnings versus 17 times, which we had in 2011. Even the longer-term average is around 14 times. So, if we have a rate cut cycle, growth recovering, earnings hanging in there, estimates not getting cut significantly, I think you could get some multiple expansions too. For the full year, you can get 25% returns from here