Market Outlook: Maintain bullish stance... Indian markets trade at ~14.0x FY14E and ~12.0x FY15E versus historic average of 15.5x. We believe that valuations have room for upside. The Indian government has moved on a number of important policy reforms in the form of FDI in multi-brand retail & aviation, besides unleashing other measures like SEB debt restructuring, diesel price deregulation, gas price hike, Cabinet Committee on Investment (CCI) and direct cash transfer (DCT). Recently, the Government agreed to further liberalize FDI in several key sectors. The Union Budget has also been balanced and credible one with more emphasis on fiscal correction. A creditable reform from UPA II has been the curtailment of the fiscal deficit, the diesel price deregulation and more recently the proposed gas price hike. The Finance Minister has also promised continuation of the reforms agenda, notwithstanding the political uncertainty surrounding the Lok Sabha elections. So, the Indian markets could gradually advance over the next 12-18 months, as the Government’s policy measures start to bear fruit. FIIs are likely to turn positive towards the Indian equities once there is clarity on the next government, as the RBI would sooner or later resume its easy monetary stance amid steady moderation in inflation. Further, global central banks too continue to keep their easy monetary policies for the moment, leaving the world markets awash with liquidity. Some of this abundant liquidity is expected to come to the Emerging Markets such as India. We see the main Indian indices ending FY14 on a positive note although in the short-term there could be some temporary hiccups due to political uncertainty, weakness in the rupee and anxiety surrounding Fed’s QE exit.
Posted on: Sun, 28 Jul 2013 08:13:39 +0000
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