>INDIA POLITICS (ULJK SECURITIES)

India Votes for Stability
Singh is still the King

Indians have done it. The result of the 2009 election, which came as a positive surprise to the market, is a clear mandate for stability, growth and progress for the Indian economy. The mandate for the congress led UPA coalition is better than what most psephologists would have expected. The new UPA is now more cohesive and substantially stronger than the earlier one. Having won in nearly 200 seats, about 55 seats more than the previous Parliament, the Congress itself has moved into a position of strength within UPA and need no Left parties for support.

We expect a re‐rating of the Indian equities on the basis of improvement in the fundamentals of the economy. We, in our report “Investment Ideas for 2009” dated 19th Jan’09, clearly cited a positive outlook for the Indian economy and expected a revival post election. We expect the new government to give priority to revive the economy from the global slowdown by way of more public investment.

The prime focus of the government will be to reduce the fiscal deficit to the FRBM limit without compromising on the need of more government investment in the social and infrastructure sector. India needs more FDI in key infrastructure sectors for growth and we expect the present UPA government to relax FDI cap in aviation and other non strategic sectors.

BULLS EYE
We have hit the bull’s eye with our Investment Ideas for 2009 report. All the 13 stocks we have recommended achieved the target (though the target was full year target for FY09). On an average the stocks have moved 34% within a span of 4 months. Our model portfolio (based on investment on our recommended stocks) has outperformed the BSE 200 index by 5 percentage pts. We still remain positive over the performance of our recommended stocks and believe them to outperform the broader market.

INVESTMENT IDEAS FOR 2009 OF FOLLOWING STOCKS ALONG WITH TARGETS ARE RECOMMENDED IN THIS REPORT:

• NTPC
• L&T
• SUN PHARMA
• AXIS BANK
• RELIANCE INFRA
• SUN TV
• GLENMARK PHARMA
• EDUCOMP
• YES BANK
• WELSPUN GUJARAT
• SHREE CEMENT
• GUJARAT NRE COKE
• BRFL

Sensex target revised:
On the back of the changed socio‐economic condition, we revised our Sensex target for FY10 to 16905. We expect that the world revive from the current slowdown and demand to pick up. We expect a 15% increase in the Sensex EPS and implies a PE of 20x. We are confident of the EPS revision unless there some unforeseen event hampers this growth.

Sectors likely to get more emphasis

Banking‐ Reform in Indian banking sector. More merger or amalgamation among PSU banks likely in line of BASEL II norms and opening up of the Indian Banking sector.

Infrastructure‐ Increase public investment in infrastructure in order to churn up the economy. India needs US$ 500 bn of investment in the infrastructure sector in the next 5 years to maintain the 8% GDP growth rate. We expect government to step‐up spending on key infrastructure e.g. roads, bridges and port development.

Telecom‐ 3G and Wimax licensing and better spectrum allocation along with broad band connectivity to villages will be on the top of the new UPA governments agenda. Allocation of frequency for telecom service providers and new rules for subscribers to switch operators using the same telephone numbers are among the policy initiatives for the sector expected to be on top of the agenda for the new government. The new government is also expected to take the real first step towards listing the state‐run Bharat Sanchar Nigam Ltd (BSNL) on stock exchanges. The industry also expects some rationalization of the revenue‐sharing regime from the present 25‐ 30% of the revenues with the government.

Power‐ Thrust on UMPPs and rural electrification program. We expect the total production to grow to 180,000 MW by 2012 with more thrust on Nuclear and alternative source of power generation.

Textile‐ Tax benefit and other subsidy to revive the sector

Agro industries‐ Buzz around of a second Green Revolution.


To see full report: INDIA POLITICS