The Union
Budget 2007-08 was presented in the backdrop of an exceptional year of economic
and corporate profit growth but short-term worries like rising inflation and
interest rates driving the markets down by 8% in the preceding two weeks.
Markets fell another 4% today, driven by a global sell off in equities coupled
with several sectoral budget announcements impacting either earnings estimates
in some cases or just sentiment in most other cases. At the end of it all, our
Sensex EPS estimate for FY08 stands downgraded by 0.6% to Rs830 (from Rs835
earlier), still a YoY growth of 17.7%!
Considering the limited impact on fundamentals and positive long-term
outlook, we once again recommend taking advantage of the sharp correction to buy
stocks. Our top bets are Bharti Airtel, Reliance Communication, Maruti Udyog,
ICICI Bank, Punjab National Bank, Infosys Technologies, Dr Reddy?s, SAIL, and
Grasim. We are also upgrading our ratings of HDFC Bank, Satyam Computers, HCL
Technologies and Larsen & Toubro from Neutral to Buy after the recent
correction.