Wednesday, October 29, 2014

>Market Outlook (MICROSEC)

Indian market is likely to remain volatile due to Global market volatility which is led by fears of Global Economic slowdown led by Europe and China. Election results slated to be announced on Oct 19 in two key states will further decide Governments strength in framing bold policies.

There are many low hanging fruits like insurance bill which need to be cleared in the winter session of parliament. Lower CPI and WPI may create conducive environment for RBI to cut interest rates by end of the CY14 or early next year. Geopolitical issues, China slowdown, weakness in global markets and US Fed may indicate hiking rates sooner will prompt some investors to remain cautious. Indian
PM visit to US was successful in many ways if one takes a macro view and specially strengthening the defense sector by inviting manufacturing in India to US INC. Earning season has started which would emphasize on stock specifics according to the performance. Markets in the past has performed on beaten down stock valuation but henceforth, earnings accretion would bring new run in markets in
few upcoming quarters rather than P/E expansion. Favorable outcome on assembly results towards Central ruling party would enthuse markets in its ability to clear key bills in upper house of parliament.

Sharp decline in input prices across industries like crude oil, rubber, cotton yarn, copper will improve fundamentals across OMC’s, Auto-ancilliaries, Textiles and Consumer durable. These sectors may continue to outperform in Oct 2014. Nifty EPS(E) for CY15 is currently at ~571, Bloomberg consensus. On that basis we believe Nifty is likely to trade 13.66-14.18x CY15(E) earnings which makes a range of ~7800-8100 for October 2014. Engineers India, Dredging Corp, Max India,
Finolex Cable, CCL Product, Crompton Gr, IDFC, Tide Water, IL&FS Transportation, Blue Star, UPL Ltd., Bharat Electronics, Archies Ltd, Exide Ind, Lloyds Electric, M&M, L&T, Tata Motors, TCS, INFY, RIL, SBI, ONGC may remain strong.