Tuesday, March 31, 2009

>India Market Strategy (UBS)

Maintain bullish stance on Indian an market.....

Launch of UBS India model portfolio; 12-month Sensex target of 13,500
In this report, we launch the UBS India model portfolio. Our base-case scenario is for the Indian economy and corporate earnings to bottom by H2 FY10 and for a full recovery to occur in FY11. We are positive on the Indian stock market on a 12- month view and set a March 2010 Sensex target of 13,500.

Overweight: Autos; Banks; and Metals
Auto demand is likely to improve based on the low interest rate environment. We believe banks will benefit from an economic recovery, as the focus moves away from NPLs into growth. Globally, UBS believes Basic Materials are poised for a turnaround; hence our positive stance on Metals.

Underweight: Consumer Staples; IT Services; and Oil & Gas
We are Underweight the Consumer sector, as we believe sector outperformance will not continue. We also believe IT Services face strong headwinds and an imminent recovery looks unlikely. We are Underweight the Oil & Gas sector, as ONGC is unlikely to outperform in a recovery and could be affected by government intervention.

Top Buys: ICICI Bank; BHEL; Maruti; Reliance Infra; ITC; Tata; ABNL
ICICI Bank is a UBS Key Call; valuations are compelling as it trades at 0.5x adjusted P/BV (standalone). Bharat Heavy Electricals (BHEL) has a strong order book and hence earnings visibility. We believe Maruti is a good way to play the cyclical recovery in passenger car demand. Tata Steel, ITC, Reliance Infra, Infosys and Aditya Birla Nuvo (ABNL) are our other key Overweights.

To see full report: INDIA MARKET STRATEGY