Microsec: India Strategy May 2012

[RAJESH DESAI]

Dear Sir/Madam,

 

Indian equities continue to be lackluster amid constant headwinds for the domestic economy and in part due to last month uncertainty over GAAR Provisions and INR depreciation. Slowdown in foreign direct investments and the foreign portfolio outflows from India combined with the rising current account deficit is adding woes to the INR not to mention the fragile global economy is also putting pressure on the INR. The macro scenario is deteriorating due to the rising trade deficit and lack of reforms to curtail the current account and fiscal deficits.

 

The RBI has cut interest rate by 50 bps to uplift dwindling growth and stable economic condition. It is less likely of RBI  cutting rates further  in near future if inflation continues to remain elevated. However, we strongly believe inflation is likely to moderate more than RBI estimates merely on the base effects and cooling commodity prices. GAAR has been deferred by a year has taken the short term overhang on FII sentiments away. The European region reflects uncertainty due to political change in France which may keep markets volatile. Crude oil price correction may help improve sentiments. We believe Nifty at 4950-5050 levels looks conducive for long term investors.

 

Nifty may find strong support at 5000 levels where it would trade 12.3xFY13E EPS.  Nifty may trade  between 12-13xFY13E EPS which makes a range of 4860-5265 for May 2012. BUY Bharti Airtel, SBI, Hind Lever, and Bajaj Auto on  dips and  M&M, Godrej Ind , Cummins India and Blue Star with long term horizon.

 

 

 

Regards,

 

Team Microsec Research

 

 

 

Microsec Capital Limited

Tel: 91 33 30512100

Fax: 91 33 30512020

 

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CA. Rajesh Desai