will government's massive surge in investment ... - Myiris.com

Apr-Jun 2013 Earnings Preview
The chart above indicates MSCI India’s premium to MSCI Asia (excl. Japan) over the
last ten years. India has always traded at a premium to Asia (excl. Japan) due to its
healthier ROE, superior earnings growth and lower contribution of non-commodity
plays. The average of last ten-year’s premium is 22%. MSCI India is currently trading
at 23% premium to MSCI Asia (excl. Japan).
Top Picks
We expect the markets to remain volatile and trade broadly in the range of 5600-
6000. Although the rupee has been under pressure over the last few months we
believe that it should stabilize at the current levels due to sharp contraction in trade
and current account deficit for the next few months. Improving trade and current
account deficit over the next few months primarily due to an expected sharp fall in
gold imports, bountiful monsoons leading to cooling off of food and consumer
inflation would act as positives to goad the RBI into considering lowering rates.
However, it would be weighed against sharp plunge in the Rupee and its impact on
rise in Imported Inflation and increase in fuel and fertiliser subsidies due to increase
in under-recoveries. This would act as a constraint on RBI for lowering interest rates.
On balance we feel that the RBI would wait for the turbulence in the currency
markets to subside and then move forward on lowering interest rates. Government’s
massive drive in approving long pending infrastructure projects should act as a
catalyst in helping to revive investment cycle over the next couple of quarters.
Large Caps
! ITC ! Infosys ! ICICI Bank
! NTPC ! Tata Motors ! Larsen & Toubro
! Wipro ! Mahindra & Mahindra ! Axis Bank
! Hindustan Zinc ! Adani Port & SEZ ! YES Bank
! Shree Cement ! Ranbaxy Laboratories
Mid‐Caps
! LIC Housing Finance ! Britannia Industries ! Thermax
! United Phosphorus ! Jammu & Kashmir Bank ! Crompton Greaves
! KSB Pumps ! MT Educare
July 8, 2013 27