Indian markets are witnessing a time correction after having a stellar run over the past 12 months. Over the last fortnight, the Nifty has declined by barely 2%, but CNX Midcap index and the CNX Smallcap index have lost over 6%.
We believe that time correction in the Indian markets may continue before resuming a fresh upward journey given resistance at 6,100 levels and 26% appreciation over the past 12 months. We expect the 2013 Union Budget could provide further direction and break this deadlock.
Positives playing on the economic front:
WPI inflation has moderated to a 3-year low
Reforms agenda remains on track with FDI in multi-brand retail having gone through
Oil reforms having progressed with monthly price revisions in diesel allowed to OMCs apart from bulk diesel being completely de-regulated
The RBI has also relented with 25 bps cut in repo rate in January, 2013 and having turned more growth supportive
Rupee is beginning to recoup some of the lost ground by policy moves
So where are the markets headed and what do we recommend?
Although we see markets headed higher in the next 3 to 6 months, a near-term consolidation phase is on the cards.
In this period, we recommend investors to be wary of high beta stocks and stick with good quality names only. Most of these stocks have rallied over the past 1 year; however fundamentals in some of them are still quite weak. We recommend all investors to be wary of such stocks and invest only in the ones we strongly recommend.
Click here to download and read our 'Top Picks'.
www.rpshares.com
.Our stance on the markets:
We maintain our bullish stance on the markets over the next 6 to 9 months and see the index heading to levels of 22,000 on the Sensex / 6,800 on the Nifty. At the current levels, the Sensex trades at a PE multiple of 15.6x FY13E EPS of INR 1260 and 13.8x FY14E EPS of 1430. Historically, Indian markets have traded at valuations of 15.5x one-year forward, and that is our target multiple in arriving at a Sensex target of 22,000.
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We believe that time correction in the Indian markets may continue before resuming a fresh upward journey given resistance at 6,100 levels and 26% appreciation over the past 12 months. We expect the 2013 Union Budget could provide further direction and break this deadlock.
Positives playing on the economic front:
WPI inflation has moderated to a 3-year low
Reforms agenda remains on track with FDI in multi-brand retail having gone through
Oil reforms having progressed with monthly price revisions in diesel allowed to OMCs apart from bulk diesel being completely de-regulated
The RBI has also relented with 25 bps cut in repo rate in January, 2013 and having turned more growth supportive
Rupee is beginning to recoup some of the lost ground by policy moves
So where are the markets headed and what do we recommend?
Although we see markets headed higher in the next 3 to 6 months, a near-term consolidation phase is on the cards.
In this period, we recommend investors to be wary of high beta stocks and stick with good quality names only. Most of these stocks have rallied over the past 1 year; however fundamentals in some of them are still quite weak. We recommend all investors to be wary of such stocks and invest only in the ones we strongly recommend.
Click here to download and read our 'Top Picks'.
www.rpshares.com
.Our stance on the markets:
We maintain our bullish stance on the markets over the next 6 to 9 months and see the index heading to levels of 22,000 on the Sensex / 6,800 on the Nifty. At the current levels, the Sensex trades at a PE multiple of 15.6x FY13E EPS of INR 1260 and 13.8x FY14E EPS of 1430. Historically, Indian markets have traded at valuations of 15.5x one-year forward, and that is our target multiple in arriving at a Sensex target of 22,000.
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