Finance Friday: Indian Macro Indicators on Firm Footing

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Indian benchmark index Sensex had peaked out at 18000 on April 7. Later, it touched a panic low of 16000 on May 25. This slump of 2000 points can be safely assumed to have been visited on the back of Greece-led European crisis, mixed with negative sentiment on the fears of a likely double dip recession in the US.

However, over the last few sessions, the bounce back from Sensex levels 16000 to 17000 has caught the bears on the wrong footing, as Indian equity markets recouped half the losses.

The sharp volatility in the markets hints towards uncertainty and chaos amongst the investors. They are concerned about the prospects of the European crisis and susceptibility of the huge $1 trillion rescue package to meet the economic and financial needs of the debt-struck Southern European countries.

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Under such shadows of uncertainty, let’s have a look as to what the brokerage and other institutional reports are recommending to their clients:

Macro Overview:

Sanjay Shah of Morgan Stanley says India is likely to see more fund inflows. He said that the positive macro story of India has already attracted overseas flow of $14 billion in the last 6-8 months and another $4 billion from domestic companies.

He further said that Indian markets will go through a consolidation phase and investors are expected to buy on every decline. He exuded confidence from the fact that macros in India are improving with events such as 3G auctions, increase in the urea price, the gas price increase; which could drag down the high fiscal deficit of the country.

Indian Valuations

Khiem Do of Baring Asset Management says Russia is the cheapest of BRIC economies at 6 times the P/E ratio. Brazil quotes at 10 times and China is valued at 12 times earnings. He further says that at 16 times earnings India is quite fairly valued from the Indian context.

The analyst prefers small to mid-cap counters as some stocks are available below 10 times price earnings ratio for growth companies. He prefers infrastructure, consumer, finance and technology as sectoral bets.

Gearing up for Nifty 6000?

Arjuna Mahendran of HSBC Private Bank says Indian stock markets seen to move higher 15-20% from here by the year end. In an astounding finding, Arjuna further said that India probably has the highest proportion of exports to Europe in its total pie.

Domestically, he expects financials to lead in any further rally as they are the benchmark for the economic growth. He is also positive on broad domestic consumption story apart from financials.

Short-term Technical View

Technical Analyst Gurudatta Dhanokar of Almondz Global Securities says the next big resistance for Bharti Airtel is around Rs.300/-, above which the stock can appreciate another 10% over the medium to long term. Reliance Communications has a short to medium term target of Rs.165-170/-.

On the index movement, the analyst says near-term support exists at Nifty 4900 and resistance remains around 5080-5100 levels. Above 5100, Nifty can move higher to test 5200 and 5370 levels for a major resistance at 5400.

Where do you feel is Indian stock markets headed over near-term horizon?

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