MARKET HAS CORRECTED ALMOST 8% IN A MONTH, STILL A NEGATIVE STANCE IS MAINTAINED ON STOCK MARKET AND BELIEVE THAT THE MACRO HEADWINDS WILL CONTINUE FOR SOME MORE TIME. INFLATION IS UNLIKELY TO FALL TILL SEPTEMBER AS MARKETS DIGEST POSSIBLE DIESEL PRICE HIKES. SINCE RBI RIGHTLY FOCUSING ON SACRIFICING SHORT TERM GROWTH FOR LONG TERM HEALTH, THERE COULD BE MORE 50bps HIKE IN INTEREST RATES.CONSUMPTION SEEMS TO BE SLOWING DOWN A BIT AND INVESTMENT CYCLE IS YET TO PICK UP,REFLECTED IN VERY LOW DEMAND GROWTH IN CEMENT AND STEEL OVER THE LAST FEW MONTHS.THE EXPORTS OUTLOOK HAS ALSO DETERIORATED TO SOME EXTENT, GIVEN THE SLOWING PACE OF RECOVERY IN THE DEVELOPED WORLD.IN MANY ANALYSTS VIEW AND ALSO IN MY VIEW,THE MARKET NEEDS TO CONSOLIDATE AT THE CURRENT LEVELS BEFORE IT COULD MOVE UP, BUT ANOTHER 7%-8% DIP CAN'T BE RULED OUT.FOLLOWING FACTORS SHOULD BE CONSIDERED AND ANALYSED VERY SERIOUSLY:
1.THERE COULD BE MORE EARNINGS DOWNGRADE:Earlier earnings estimates looked extremely high around 18% to 20% growth for FY12 however there is consensus downward revision by 2% but are still projecting 17.5% growth. Since lots of cost increases are being reflected from 1QFY12, it is expected that the earnings downgrade trend to continue. Reduction due to the lower demand scenario may take a bit longer to get built into the estimates, as most companies are still guiding reasonable numbers.
2.REASONABLE VALUATIONS BUT NOT A DEEP DISCOUNT:Indian markets are now trading close to the long term average of 14.5x PE Ratio while this is reasonable historically, we have seen the market hit a bottom of 12-13x. The premium to emerging markets still remains at 35% against the 10 year average of 26%. Tis premium has expanded as India's strong domestic demand differentiated it from the other economies during the Lehman crisis. However, the current concerns on possible slowdown in consumption may lead to marginal reduction here.Among sectors which are above long term averages are Consumer Staples,Energy, Financials and Utilities while the ones below are Materials,IT, Healthcare and Consumer Discretionary.
3.INTEREST RATES MAINTAIN UPWARD TRAJECTORY:On 3rd May RBI first made its first real aggressive move since last year and raised benchmark rates by 50bps against expectations of 25bps. The most important point to note from its annual policy was its willingness to trade some of the high growth for lower inflation in the near term in order to make way for more sustained growth trajectory going forward.It is believed that there may be at least another 50bps rate hike over the next couple of quarters..
4.INFLATION CONTINUES TO DOMINATE: Inflation has surprised negatively for the past few months and continues to pose a challenge on he policy front. According to the RBI's revised estimates, WPI inflation will likely to remain around 9% till September before tapering off. Analysts believe that the real trajectory of inflation will be determined by the pass-though effects of the petrol & diesel price hikes(1.1% to 4.7% weight in WPI, respectively) on the broader economy. The key risk here is inflation touching double digits and leading to further aggressive rate hikes.
5.OIL PRICES LIKELY TO REBOUND: Although the crude prices have come off their recent peaks, outlook on crude for FY12 remains bullish along with other commodities. It is believed that this will continue to push up the input costs for companies and exert pressure on margins, particularly if demand also softens in the near future.
6.GOVERNMENT'S FISCAL DEFICIT TARGET STILL UNDER CLOUD: Ballooning petroleum and fertilizer subsidies since the beginning of the year have already dented the government's fiscal position. Analysts believe that as per estimates government's share in total oil under-recoveries in FY12 could be as high as US$18.5bn after adjusting Rs.3/lt hike in diesel prices.At that level, the deficit turn out at 5.3% of GDP, much higher than government's 4.6% estimates.
FUNDAMENTAL VALUATION RANGE OF THE MARKET COULD BE:
SENSEX PROBABLE HIGH: 19400-19500
SENSEX PROBABLE LOW:16500-17000
NIFTY PROBABLE HIGH: 5800-5900
NIFTY PROBABLE LOW: 5200-5000
.....
.....
......
........
NOW WHAT AN INDIVIDUAL SHOULD DO IN SUCH SCENARIO OF WEAK MARGINS AND EARNING OUTLOOK????????
A GOOD VALUE BUYING/STOCK SELECTION SHOULD BE MADE RATHER THAN TIMING THE MARKET
A GOOD VALUE BUYING/STOCK SELECTION SHOULD BE MADE RATHER THAN TIMING THE MARKET
A GOOD VALUE BUYING/STOCK SELECTION SHOULD BE MADE RATHER THAN TIMING THE MARKET
FOLLOWING STOCKS SHOULD BE BOUGHT IN PORTFOLIO FOR NEXT 12-18 MONTHS:(TARGETS WILL BE GIVEN LATER)
1.INDIAN HOTELS(81.70): BUY THIS STOCK FOR SHORT(95),MEDIUM(120) AS WELL AS LONG TERM(300++) PORTFOLIO. STOCK COULD PROVE TO BE MULTI-BAGGER.
2.EIH LTD(83.70):BUY THIS STOCK FOR SHORT(95),MEDIUM(110) AS WELL AS LONG TERM(300++) PORTFOLIO. STOCK COULD PROVE TO BE MULTI-BAGGER.
3.ITC(193.55):BUY THIS STOCK FOR SHORT,MEDIUM AS WELL AS LONG TERM PORTFOLIO.SHORT TERM TARGET OF 210++.
4.PATNI(356.55):BUY THIS STOCK FOR SHORT TO MEDIUM TERM PORTFOLIO. THERE COULD BE SOME DE-LISTING NEWS IN THE OFFING AND PRICES COULD HIKE MUCH TO GIVE HUGE GAINS. A VERY GOOD BUY FOR 2-3 MONTHS WITH A PRICE TARGET OF 500+++. MUST BUY, MUST BUY, MUST BUY.
5.INGERSOLL RAND(469.15):BUY FOR 3-6 MONTHS FOR GOOD GAINS. THE NEWS FLOW WILL MAKE STOCK RISE TO THE TUNE OF 100-120 RUPPES FROM CMP.
6. SKUMAR(67.00):BUY THIS STOCK FOR SHORT,MEDIUM AS WELL AS LONG TERM PORTFOLIO. STOCK COULD PROVE TO BE MULTI-BAGGER. RIED & TAYLOR IPO WILL MAKE THIS STOCK RUN TO 80-88 LEVELS IN HE SHORT TERM, AS THE IPO IS EXPECTED TO COME BY JUNE END. POST IPO THE STOCK WILL SEE UNLOCKING THE VALUE. HOLD FOR TARGETS OF 120 & 300 IN LONG TERM.
OTHER STOCKS WHICH NEED TO BE FOCUSED ARE:
FERTILISER STOCKS LIKE RCF, CHAMBAL, NATIONAL FERTLISERS, ETC,
BANKING STOCKS LIKE YES BANK AND SBI
FMCG STOCKS LIKE HUL & ITC
FOOD STOCKS LIKE KOHINOR FOOD, LT OVERSEAS....
HOUSE OF PEARLS, GITANJALI GEMS, PRAKASH INDUSTRIES, GARDEN SILK, SURYA ROSHINI AND HIND OIL EXPL
NOTE:THOSE WHO WISH TO HAVE LIVE INTRA-DAY MARKET UPDATE, INFORMATION AND TIPS SHALL COME TO YAHOO MESSENGER ID vikas198012003@yahoo.co.in or join in "Face Book" "astrologer vikas srivastava"
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.Nothing in this article is, or should be construed as, investment advice.
Disclaimer:
This is neither an offer nor a solicitation to purchase or sell securities. The information and views contained on this blog are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in, or have positions in the securities mentioned in their articles. Neither I (Vikas Srivastava) nor any of the contributors accepts any liability arising out of use of the above information/article. Reproduction in whole or in part without written permission is prohibited.
1.THERE COULD BE MORE EARNINGS DOWNGRADE:Earlier earnings estimates looked extremely high around 18% to 20% growth for FY12 however there is consensus downward revision by 2% but are still projecting 17.5% growth. Since lots of cost increases are being reflected from 1QFY12, it is expected that the earnings downgrade trend to continue. Reduction due to the lower demand scenario may take a bit longer to get built into the estimates, as most companies are still guiding reasonable numbers.
2.REASONABLE VALUATIONS BUT NOT A DEEP DISCOUNT:Indian markets are now trading close to the long term average of 14.5x PE Ratio while this is reasonable historically, we have seen the market hit a bottom of 12-13x. The premium to emerging markets still remains at 35% against the 10 year average of 26%. Tis premium has expanded as India's strong domestic demand differentiated it from the other economies during the Lehman crisis. However, the current concerns on possible slowdown in consumption may lead to marginal reduction here.Among sectors which are above long term averages are Consumer Staples,Energy, Financials and Utilities while the ones below are Materials,IT, Healthcare and Consumer Discretionary.
3.INTEREST RATES MAINTAIN UPWARD TRAJECTORY:On 3rd May RBI first made its first real aggressive move since last year and raised benchmark rates by 50bps against expectations of 25bps. The most important point to note from its annual policy was its willingness to trade some of the high growth for lower inflation in the near term in order to make way for more sustained growth trajectory going forward.It is believed that there may be at least another 50bps rate hike over the next couple of quarters..
4.INFLATION CONTINUES TO DOMINATE: Inflation has surprised negatively for the past few months and continues to pose a challenge on he policy front. According to the RBI's revised estimates, WPI inflation will likely to remain around 9% till September before tapering off. Analysts believe that the real trajectory of inflation will be determined by the pass-though effects of the petrol & diesel price hikes(1.1% to 4.7% weight in WPI, respectively) on the broader economy. The key risk here is inflation touching double digits and leading to further aggressive rate hikes.
5.OIL PRICES LIKELY TO REBOUND: Although the crude prices have come off their recent peaks, outlook on crude for FY12 remains bullish along with other commodities. It is believed that this will continue to push up the input costs for companies and exert pressure on margins, particularly if demand also softens in the near future.
6.GOVERNMENT'S FISCAL DEFICIT TARGET STILL UNDER CLOUD: Ballooning petroleum and fertilizer subsidies since the beginning of the year have already dented the government's fiscal position. Analysts believe that as per estimates government's share in total oil under-recoveries in FY12 could be as high as US$18.5bn after adjusting Rs.3/lt hike in diesel prices.At that level, the deficit turn out at 5.3% of GDP, much higher than government's 4.6% estimates.
FUNDAMENTAL VALUATION RANGE OF THE MARKET COULD BE:
SENSEX PROBABLE HIGH: 19400-19500
SENSEX PROBABLE LOW:16500-17000
NIFTY PROBABLE HIGH: 5800-5900
NIFTY PROBABLE LOW: 5200-5000
.....
.....
......
........
NOW WHAT AN INDIVIDUAL SHOULD DO IN SUCH SCENARIO OF WEAK MARGINS AND EARNING OUTLOOK????????
A GOOD VALUE BUYING/STOCK SELECTION SHOULD BE MADE RATHER THAN TIMING THE MARKET
A GOOD VALUE BUYING/STOCK SELECTION SHOULD BE MADE RATHER THAN TIMING THE MARKET
A GOOD VALUE BUYING/STOCK SELECTION SHOULD BE MADE RATHER THAN TIMING THE MARKET
FOLLOWING STOCKS SHOULD BE BOUGHT IN PORTFOLIO FOR NEXT 12-18 MONTHS:(TARGETS WILL BE GIVEN LATER)
1.INDIAN HOTELS(81.70): BUY THIS STOCK FOR SHORT(95),MEDIUM(120) AS WELL AS LONG TERM(300++) PORTFOLIO. STOCK COULD PROVE TO BE MULTI-BAGGER.
2.EIH LTD(83.70):BUY THIS STOCK FOR SHORT(95),MEDIUM(110) AS WELL AS LONG TERM(300++) PORTFOLIO. STOCK COULD PROVE TO BE MULTI-BAGGER.
3.ITC(193.55):BUY THIS STOCK FOR SHORT,MEDIUM AS WELL AS LONG TERM PORTFOLIO.SHORT TERM TARGET OF 210++.
4.PATNI(356.55):BUY THIS STOCK FOR SHORT TO MEDIUM TERM PORTFOLIO. THERE COULD BE SOME DE-LISTING NEWS IN THE OFFING AND PRICES COULD HIKE MUCH TO GIVE HUGE GAINS. A VERY GOOD BUY FOR 2-3 MONTHS WITH A PRICE TARGET OF 500+++. MUST BUY, MUST BUY, MUST BUY.
5.INGERSOLL RAND(469.15):BUY FOR 3-6 MONTHS FOR GOOD GAINS. THE NEWS FLOW WILL MAKE STOCK RISE TO THE TUNE OF 100-120 RUPPES FROM CMP.
6. SKUMAR(67.00):BUY THIS STOCK FOR SHORT,MEDIUM AS WELL AS LONG TERM PORTFOLIO. STOCK COULD PROVE TO BE MULTI-BAGGER. RIED & TAYLOR IPO WILL MAKE THIS STOCK RUN TO 80-88 LEVELS IN HE SHORT TERM, AS THE IPO IS EXPECTED TO COME BY JUNE END. POST IPO THE STOCK WILL SEE UNLOCKING THE VALUE. HOLD FOR TARGETS OF 120 & 300 IN LONG TERM.
OTHER STOCKS WHICH NEED TO BE FOCUSED ARE:
FERTILISER STOCKS LIKE RCF, CHAMBAL, NATIONAL FERTLISERS, ETC,
BANKING STOCKS LIKE YES BANK AND SBI
FMCG STOCKS LIKE HUL & ITC
FOOD STOCKS LIKE KOHINOR FOOD, LT OVERSEAS....
HOUSE OF PEARLS, GITANJALI GEMS, PRAKASH INDUSTRIES, GARDEN SILK, SURYA ROSHINI AND HIND OIL EXPL
NOTE:THOSE WHO WISH TO HAVE LIVE INTRA-DAY MARKET UPDATE, INFORMATION AND TIPS SHALL COME TO YAHOO MESSENGER ID vikas198012003@yahoo.co.in or join in "Face Book" "astrologer vikas srivastava"
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.Nothing in this article is, or should be construed as, investment advice.
Disclaimer:
This is neither an offer nor a solicitation to purchase or sell securities. The information and views contained on this blog are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in, or have positions in the securities mentioned in their articles. Neither I (Vikas Srivastava) nor any of the contributors accepts any liability arising out of use of the above information/article. Reproduction in whole or in part without written permission is prohibited.
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