Monetary easing, valuations to support Indian markets: UBS
Valuations support Indian markets: Markets trading at average range. There is not too much risk at buying at these levels despite sharp rally.
Indian markets are set to witness big gains in 2012. What's more, mid cap and small cap stocks might bounce back this year, Gautam Chhaochharia, Executive Director and Head of India Mid Cap Research at UBS Securities, told NDTV Profit today.
"We are positive on Indian markets for two reasons... The big difference is 2011 was a year of monetary tightening while 2012 looks like a monetary easing year. Markets react positively to monetary easing. Secondly, the big issues of last year -politics, issues in implementation of politics, budget approval- seem to be bottoming out in 2012," he said.
Market outlook:
An upside both in markets and stocks.
Why:
- Post UP elections, the political overhang will reduce.
- Inflation is on the downtrend. Even, globally inflation is unlikely to become a big issue for emerging markets.
- RBI easing cycle: There might be many doubts at the beginning of the easing cycle but these will be crossed.
Is this the right time to buy especially after the recent rally?
- Valuations support Indian markets: Markets trading at average range. There is not too much risk at buying at these levels despite sharp rally.
- Markets trading at 13-13.5 times PE, they can easily scale up to 15 times this year and a year from now, markets might trade at 20 times.
- The biggest boost is during the initial round of monetary easing after which there would be some consolidation.
Stock picks:
Midcaps:
JSW Steel: Will benefit if mining ban is lifted, valuations cheap.
GVK, Lanco Infra: High risk names. These stocks have disappointed investors over the last 2-3 years in terms of financial and project execution. But they will benefit from monetary easing and government spending.
Phoenix Mill: Quality retail assets and the stock is cheap.
Prestige Estates: Beneficiary of strong Bangalore market.
Large caps:
Coal India:
ICICI Bank: Beneficiary of monetary easing cycle both from liability and asset side.
Tata Power, L&T: beneficiary of macro easing and government action.
Sell:
Removed Manappuram Finance from model portfolio after RBI notice.