India Infoline overweight on market sentiment
Monday, 11 January 2010
MUMBAI, Jan 10 (Economic Times): Broking firm India Infoline expects a roller-coaster movement in Indian equities in 2010, noting that the mood is one of caution.
India Infoline is of the view that though near-term technical momentum for the market seems positive, a rally is unlikely to sustain if the forecast growth doesn't come in. However, the absence of hysterical greed or euphoria is certainly a comfort.
"Consensus Nifty EPS estimate for FY12 assumes a 50-per cent jump over FY10 levels, which is prima facie reasonable, given the big increase in new capacities across sectors and the low base from near-zero EPS growth through FY08-10.
We believe that global growth cycle is supportive, but the global cycle needs to be complimentary enough," said broking firm's India Strategy report.
Given their positive stance on consumption, India Infoline's portfolio strategy is to be overweight on all sectors linked to the consumption chain. "In addition, we overweight pharma and software sectors as earnings momentum remains strongly positive, with more upgrades to come.
While a tightening liquidity environment is not necessarily conducive for banks, we believe that a lot of negative news is in the price and a revival in credit growth is a matter of time. We overweight banks as well. A major recovery in the global growth cycle would be the key risk to our portfolio stance," the report said.
On FII flows, the broking firm is of the view that it will remain positive, given the increased asset allocations to India. Adding a note of caution, however, it maintains that history shows, net institutional buying alone is no guarantee for markets to give positive returns. With the government keen on divestment, they expect capital raising in 2010 to be as robust as in 2009.
India Infoline is of the view that though near-term technical momentum for the market seems positive, a rally is unlikely to sustain if the forecast growth doesn't come in. However, the absence of hysterical greed or euphoria is certainly a comfort.
"Consensus Nifty EPS estimate for FY12 assumes a 50-per cent jump over FY10 levels, which is prima facie reasonable, given the big increase in new capacities across sectors and the low base from near-zero EPS growth through FY08-10.
We believe that global growth cycle is supportive, but the global cycle needs to be complimentary enough," said broking firm's India Strategy report.
Given their positive stance on consumption, India Infoline's portfolio strategy is to be overweight on all sectors linked to the consumption chain. "In addition, we overweight pharma and software sectors as earnings momentum remains strongly positive, with more upgrades to come.
While a tightening liquidity environment is not necessarily conducive for banks, we believe that a lot of negative news is in the price and a revival in credit growth is a matter of time. We overweight banks as well. A major recovery in the global growth cycle would be the key risk to our portfolio stance," the report said.
On FII flows, the broking firm is of the view that it will remain positive, given the increased asset allocations to India. Adding a note of caution, however, it maintains that history shows, net institutional buying alone is no guarantee for markets to give positive returns. With the government keen on divestment, they expect capital raising in 2010 to be as robust as in 2009.