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ValueGuide: Difference between 2008 and 2013
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Monday, January 7, 2013 |
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Sharekhan ValueGuide
[January 07, 2013] | | | | Summary of Contents | EQUITY FUNDAMENTALS | | | THE STOCK IDEAS REPORT CARD
FROM SHAREKHAN'S DESK
Difference between 2008 and 2013
Two thousand and twelve had begun amidst much gloom and had the appearance of being a difficult year for equity investors. However, a few positive events made all the difference and the benchmark indices ended the year with smart gains of 26%. The easing of the monetary cycle and the unexpected announcement of a series of reforms later in the year breathed life back into our stock market in 2012. Not only in India but financial markets the world over also stabilised in 2012 as central banks unleashed quantitative easing programmes to support their economies and avoid slipping into a recession.
MARKET OUTLOOK 2013: Volatility to rule again -
2012-renewed policy activism made all the difference: Equities were at the losing end for the better part of 2012 till the government woke up from a slumber and helped the market to register a handsome gain of close to 26% for the calendar year. The foreign investors kept faith and pumped in $24.4 billion in the Indian equity market. That too in a year when India's macro conditions were deteriorating and the leading global rating agencies had to revise the rating outlook to "Negative" from "Stable". Moreover, India faced the threat of a sovereign rating downgrade to the "Junk" level on account of the ballooning twin deficits (current account and fiscal deficits) and a complete policy paralysis. On the other hand, domestic investors bailed out of equity and continued to chase the other asset classes like gold and real estate. -
2013-begins on a much better note but domestic investors remain sceptical: Unlike the beginning of 2012, the start of 2013 has been much better. Though there are challenges (in terms of slowing exports, rising current account deficit and ballooning external debt), but the domestic macro-economic scenario is likely to improve with the easing of the headline inflation figure and the expected re-initiation of policy rate cuts by the Reserve Bank of India (RBI) in the January-March quarter (if not in January itself). However, the domestic investors remain sceptical and have not yet participated meaningfully in the equity market. -
Global cues to remain supportive: The policy makers in the USA have finally managed to sign a deal to limit tax rate hikes to only the rich (above an annual income of $400,000 individually or $450,000 for a household) and also to keep spending to support the economy. The decision on the final contours of the deal has been postponed by two months and mitigates the immediate threat to the US economy and equity market. The European situation is much more unpredictable. Italy and Spain are turning out to be new pain points with the Greece exit from the European Union on the backburner now. Elections in Italy in April and in Germany in the later part of the year could be the other influencing events for the equity markets globally. -
Valuations-earnings upgrades key to further re-rating of multiples: In addition to liquidity, the trough of the downgrades in the earnings estimates by analysts and the potential upgrades in the earnings estimates would be the key re-rating factors for the valuation multiple of the domestic equity market. We believe that the earnings downgrade cycle is largely behind us. Most of the negatives are largely factored in the analysts' estimates. Moreover, the easing of the interest rates with the expected cooling off of the energy prices (crude oil, coal etc) could support the growth in the corporate earnings. However, the earnings upgrades would depend on the follow-up policy actions and the ability of corporate India to exceed analysts' expectations. -
Another year of volatility with positive returns from the benchmark indices: Do not expect a secular trend yet. Two thousand and thirteen is most likely to be another year of high volatility with bouts of risk aversion and liquidity driven sharp rallies. However, we expect double-digit positive returns from the benchmark indices this year too which would be largely in line with the earnings growth expected in FY2014. Those who completely missed out on the 2012 rally can look at investing systematically (in a gradual manner) and use volatility as an opportunity to enter at attractive levels. In addition, we believe that the equity market provides stock-specific attractive investment opportunities at all times and it is never too late to enter it. The themes to play in 2013 would be largely economic recovery driven consumer discretionary sectors (like media, real estate, NBFCs) and stock-specific balance sheet restructuring stories.
STOCK IDEAS - Aurobindo Pharma: A sweet pill
- Capital First: Leveraging on its new-found pedigree
- Speciality Restaurants: Dig into it
SWITCH IDEAS - FMCG: Closure of switch call from Asian Paints to GSK Consumer
- Tea: Piping hot
STOCK UPDATES - Bajaj Auto: Price target revised to Rs1,983
- Bajaj Corp: Price target revised to Rs241
- Eros International Media: Emphasis on monetisation of content
- Glenmark Pharmaceuticals: Price target revised to Rs600
- HDFC Bank: Price target revised to Rs712
- Hindustan Unilever: Event Update: Unilever Indonesia hikes royalty payments to Unilever
- Mahindra & Mahindra: Price target revised to Rs1,046
- Persistent Systems: Niche offerings to drive future growth
- Provogue India: Discontinuing coverage
- Selan Exploration Technology: Better times ahead
- Sun Pharmaceutical Industries: Price target revised to Rs775
- Tata Consultancy Services: Expect soft Q3FY2013 but management remains confident
- Wipro: Strengthens international presence in consumer care business
SHAREKHAN SPECIAL - Monthly economy review
- Q3FY2013 IT earnings preview
SECTOR UPDATES - FMCG: Falling palm oil prices positive for soap makers
VIEWPOINT
| | EQUITY TECHNICALS | | | | | EQUITY DERIVATIVES | | - Derivative view: Roaring start to 2013
| | COMMODITY FUNDAMENTALS | | - Macro-economy
- Crude oil: Can rise to $98 levels in short term
- Precious metals: Further downside seen before recovery
- Base metals: Expected to rise amid huge volatility
- Major economic events in January 2013
| | COMMODITY TECHNICALS | | - Gold: Bears in control
- Silver: Bearish outlook
- Crude oil: Opportunity for bears
- Copper: Triangle near completion
- Natural Gas: Channelised play
- Jeera: Fall on the cards
| | CURRENCY FUNDAMENTALS | | | Currency market: Rupee-reform rally exhausted - INR-USD CMP: Rs54.49 (spot)
- INR-GBP CMP: Rs88.17 (spot)
- INR-EUR CMP: Rs71.44 (spot)
- INR-JPY CMP: Rs62.58 (spot)
| | CURRENCY TECHNICALS | | - USD-INR: Rolling down
- GBP-INR: Strong barrier
- EUR-INR: Bearish pattern
- JPY-INR: A vertical fall
| | PMS DESK | | | Sharekhan PMS funds: Fund manager's view and product performance | - ProPrime-Top Equity
- ProPrime-Diversified Equity
- ProTech-Diversified
- ProTech-Nifty Thrifty
- ProTech-Trailing Stops
| | | ADVISORY DESK | | | Monthly performance of Advisory products | - MID Trades
- Derivative Ideas
| | MUTUAL FUNDS DESK | |
MF PICKS
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EARNINGS GUIDE
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| | Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article. | | | |
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