India Strategy - Dec 2012 - Microsec

In December 2012, we expect the UPA government may be able to mop up support in favor of FDI in retail. Other bills may also see the light of the day. However, other than this we believe the NIB meeting will be important as focus would be given to the infrastructure sector, which is the need of the hour. Globally, the issues are still pertaining and don't have any quick fix to it. US fiscal cliff during the year remains a big event which paves the way forward for the markets. We can expect market volume to reduce due to festive and holiday season globally. We expect RBI to restrain themselves from cutting REPO for now and take the action in CY13.

We have seen strong earnings from private sector Banks like ICICI bank and HDFC Bank and from capital goods behemoth L&T. We expect these companies to remain in the positive bias. Selective PSU banking stocks coming in focus and investment can be done due to its cheap valuation for long term horizon and also due to expected reversal in rate cycles.

We expect the earnings for FY14 to be revised upwards. Nifty EPS (E) for FY14 is currently is 427, Bloomberg consensus, We expect this to be re-rated by 6-8% on the higher side, assuming Nifty to register EPS of 453 on the lower side of revision. On that basis we believe Nifty is likely to trade 12.7-13.2xFY14 (E) earnings, which makes a range of 5753-5980 for December trading. ICICI Bank, LIC Housing, Ranbaxy , Eros International, Blue Star, NMDC, Madras Cement, Cummins, Cera Ceramics, Sintex, Pidilite, Maharashtra Seamless would remain a BUY.

Source : Equity Bulls

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