Earlier BOFA-Merrill in its expectations for 2010 has said it will be the year of consolidation. In continuing its coverage on equity strategy for 2010, Merrill advises investors to pick cherries. Since company and sector performances are growing more differentiated, suggesting the market is responding less to macro economic news and more to business specifics. Thus, adopt a stock-specific approach for portfolio construction in 2010. (more…)
Category: Economy, Markets and Macro Views
Research on Indian Economy, Markets and Macro Indicators
WPI nears 5% – Rising Faster than Markets
India’s WPI inflation rose more than expected by 4.78% y-o-y in November from 1.34% in October. On a seasonally adjusted MoM basis, inflation was up 2.2% v/s 0.4% last month. Given the current uptrend, inflation could likely cross 6% in December and 8% by March 10.
Growth was led primarily by Primary Articles (+11.8% YoY), with food being the major driver (+16.7%). Within this category, key commodities driving prices were pulses (more…)
Valuations Still Attractive for Longterm Investors – Morgan
The biggest debate is about India’s multiple and whether it deserves to trade at a P/E premium to emerging markets. What is the sustainable premium for Indian equities, if any, and whether the current market multiple makes the market vulnerable to relative underperformance ?
On the long-term relative multiple, Morgan’s opinion is Indian equities deserve to trade at a premium (of around 25-30% versus the historical average of 8%) driven by the factors listed below. [This explains their optimistic target in the past.]
India is likely to add around 10 million new workers to its workforce on an annual basis. As the workforce grows, so will the savings and hence the growth rate. This will be the key driver to profit growth (more…)
Essar Oil – Focus on Integrated Play
Like its enviable neighbor in Gujarat, Essar Oil Ltd too is emerging as an integrated player across the energy chain with value-creation options in refining and upstream.
Essar is upgrading its 10.5mmtpa refinery to 16mmtpa, adding significant secondary processing capacities. The expansion would give ESOIL significant advantages in: complexity allowing ESOIL to process a tougher crude diet (API 24.8), enabling better GRMs; and (2) competitive cost structure. (more…)
Gold – Soaring Prices, Imports Down – Remaking in the Rise ?
Indian gold demand has been price inelastic, with the bulk of Indian demand being jewellery. But record-high prices and the global recession, coupled with the drought, have kept away consumers this year. Latest data by the World Gold council indicate that India’s gold demand stood at 137.6 tonnes in 3Q09, down 49% YoY.
Cumulatively, demand in 9M09 was 264 tonnes, vs. 553 tonnes in the same period last year. This could be due to consumers meeting demand by (1) exchanging old items – exchange activity accounts for 60% of retail turnover in recent quarters. (2) melting down and (more…)
Higher CAPEX Growth in FY11- HSBC
HSBC economists have an above-consensus GDP growth forecast of 8.5% for the next fiscal year. This forecast is led by an above consensus investment growth forecast of 14%, following a pickup in the capex cycle at the turn of the calendar year. Indian companies have raised INR528bn in equity in the current fiscal year, the second-highest level ever, and INR315bn in debt. (more…)