Best Time to Invest – Prashant Jain

Prashant Jain, Sr. Fund Manager and CIO of HDFC Asset Mgmt company says that this is the best time to invest in the Indian market if you are looking at a 24+ months horizon. He lives by what he preaches and holds more than 98% of his assets in Equities. Excerpts from his Q&A:

  • On the Macro, U.S has a very high deficit going forward and its an over-leveraged economy which has lead to series of problems. The Indian GDP will continue to grow at atleast 6% [Worst Case] while that of US will be less than 2% or may even go negative. Once the trend is clear, the de-coupling of valuations will surface among over-sentimental analysts who have reacted in India.
  • The Good News to India is fall in global commodity prices, really especially the Crude Oil which helps bring down the Indian fiscal deficit. This will calm down the Inflation and will go back to 6% or 7%.
  • Earlier, SENSEX of 14,000 was seen as base case. however, at 11,000, this is the best time to invest as valuations extremely low.In a high growth economy like ours, these dips should be treated as a fantastic opportunity to invest.
  • How India will sail through the current Global Crisis? India’s export GDP is less than 10%. Investment of Indian entities exposed to sub-prime is very very low / nil in most cases. FDI as percentage to Indian GDP is once again very low and most of the Indian industry is dependent on internal savings. In short term, there is a liquidity crisis in the market which will be resolved. If India was facing genuine banking problems then interest rates would be rising, which is not the case. If interest rates were to touch 20% then you can expect BSE SENSEx forward P/E to touch 5 [Currently trading at 11]
  • FIIs have damaged the Indian market by sudden withdrawal. Historically, Indian institutions and investors BUY when they SELL.
  • ICICI Bank is held by all the HDFC Funds. Its Balance sheet is extremely strong and Management has indicated that there is no disruption of its normal banking activity. ICICI is the largest private insurance company and this subsidiary alone accounts for its Share Price quoted on the bourses on Friday. It is mere reputation knock that has taken place.
  • Real Estate should cool off very soon and Homes should become affordable in the next 12 months.
  • Investors should not panic and switch to Debt funds, should rather be patient and continue to BUY Equity funds with 12+ months horizon.

We do like to endorse Mr. Jain’s views and continue to recommend investing in Equities. However, don’t expect returns in short-term.

I-Sec Sensex Expectation – Bearish

Due to marked deterioration in earnings outlook ICICI Secucties – i-Sec has lowered our target PE multiple to 11.8x (one Standard deviation below the 8 year mean of 15.9x) against 15.2x (8 year median) used previously. i-Sec has also pushed back the investment horizon to March 2010 from Sept 2009 to price in a more prolonged phase of risk aversion and now expect Sensex level of 16050 by then. (more…)

Industrial Production 1.3% – A Shock

Aug 08 India Industrial Production slows to 1.3% significantly lower than expectations and the lowest level seen since Oct 98. While growth was expected to come in lower due to the high base (Aug 07 @ 10.9%), the 1.3% number was a shock. On a sectoral basis, mining did relatively well at 4%, while growth in manufacturing and electricity was 1.1% and 0.8%, respectively. Cumulatively, growth during Apr-Aug slowed to 4.9% vs. 10% last year.

Capital goods was up 2.3% vs. the high base of 30.8% last Aug; Consumer goods held up at 5% but aided by the flat growth last year. What is worrying is the contraction in intermediate goods at -6.2% – the lowest level seen over 13 years. Primary components of intermediate goods include
cotton yarns, filaments, pipes, auto ancillaries, LPG and natural gas, and polyester fibers, paints and varnishes.

Infosys Q2 at 1390 Crore

Infosys Technologies has reported a net profit of Rs 1390 crore for the September 2008 quarter, as against Rs 1074 crore during the year-ago period.

The company’s total income has moved up from Rs 4005 crore for the September 2007 quarter to Rs 5143 crore for the September 2008 quarter.

Infosys Stock is currently trading down 11% at Rs 1,116. More details will be updated soon.

Update:
On a consolidated basis, the Infosys’ net sales for the quarter ended on Sep-30 rose 11.64 per cent to Rs 5,418 crore from Rs 4,854 crore in the Apr-Jun quarter. Net profit rose 9.98 per cent to Rs 1,432 crore against Rs 1,302 crore in the previous quarter.

Infosys Guidance:
The Management has given a guidance of mere 13 to 13.5% growth for FY-2009, downward revision from 20%.