Clive McDonnell, Head of Equity Strategy, BNP Paribas Securities, said
He had raised his Sensex target to 20,100 and added that he was positive on capital goods, banks and consumer goods. He further said that the Reserve Bank of India (RBI) was unlikely to raise rates anytime soon.
McDonnell said that investors were nervous about the 20% correction in the Chinese market and were also underweight on Korea, Taiwan and India.
We have raised our index targets yesterday across the board not just in India and we are now looking at 20,000 on the Sensex. I think it’s important to keep in mind what the implied valuation level of that is. On a price to book basis you are looking at about 3 times for the Sensex at our target; market currently trading probably by 2.6 times their price to book. Certainly a punchy number for India but it does go back to a point that we see a further dollar weakness ahead, that leading to an increase in investor risk appetite and given the improved investment climate in India we think India will be able to continue to attract foreign capital in combination with good earnings numbers. Comparison to other countries around the region India and China stand out. Both will come through this global recession with surprising resilience in the EPS numbers. Yes, they have dipped but not as bad as what we are seeing in some of the more cyclical markets like Korea- Taiwan.
Our biggest over weight center on the capital goods space the banks and also the consumer related plays. We think with growth likely to surprise on the upside the banks are the best way to play that in our mind going forward. We don’t see a lot of risk of upside to interest rates. We see similar to most economies across the globe, no negative output gap in place in India. Notwithstanding short-term volatility in prices associated with weaker monsoon. We don’t see RBI rushing to raise rates anytime soon and we think that should be supported with the bank sector helped by the trend of resilience in the consumer.
The focus would more be on the power equipment makers not just in India but also in China and in Japan and the view being that you are seeing a lot of postponement of investment and I think there is lot of potential given the improved access to liquidity that we are seeing globally for some of those projects to be restarted. If you look at from a valuation point of view, it is the power equipment providers or basically the capital good providers that have lagged a bit in the rally so far.
S: MC
He had raised his Sensex target to 20,100 and added that he was positive on capital goods, banks and consumer goods. He further said that the Reserve Bank of India (RBI) was unlikely to raise rates anytime soon.
McDonnell said that investors were nervous about the 20% correction in the Chinese market and were also underweight on Korea, Taiwan and India.
We have raised our index targets yesterday across the board not just in India and we are now looking at 20,000 on the Sensex. I think it’s important to keep in mind what the implied valuation level of that is. On a price to book basis you are looking at about 3 times for the Sensex at our target; market currently trading probably by 2.6 times their price to book. Certainly a punchy number for India but it does go back to a point that we see a further dollar weakness ahead, that leading to an increase in investor risk appetite and given the improved investment climate in India we think India will be able to continue to attract foreign capital in combination with good earnings numbers. Comparison to other countries around the region India and China stand out. Both will come through this global recession with surprising resilience in the EPS numbers. Yes, they have dipped but not as bad as what we are seeing in some of the more cyclical markets like Korea- Taiwan.
Our biggest over weight center on the capital goods space the banks and also the consumer related plays. We think with growth likely to surprise on the upside the banks are the best way to play that in our mind going forward. We don’t see a lot of risk of upside to interest rates. We see similar to most economies across the globe, no negative output gap in place in India. Notwithstanding short-term volatility in prices associated with weaker monsoon. We don’t see RBI rushing to raise rates anytime soon and we think that should be supported with the bank sector helped by the trend of resilience in the consumer.
The focus would more be on the power equipment makers not just in India but also in China and in Japan and the view being that you are seeing a lot of postponement of investment and I think there is lot of potential given the improved access to liquidity that we are seeing globally for some of those projects to be restarted. If you look at from a valuation point of view, it is the power equipment providers or basically the capital good providers that have lagged a bit in the rally so far.
S: MC
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