>India Strategy (EDELWEISS)

Voting for India!

India: Resilience amidst global turmoil

The Indian market is up over 30% in the past one month, outperforming most EMs. On a YTD basis, however, India is still underperforming several EMs With the Sensex now over 11,000, the market seems to be pricing in two key events:

1. An acceptable election outcome (UPA- or NDA-led government); and
2. Likely recovery in the global economy by CY09 end

* We believe there is a fair chance of a stable government coming to power. Lead 2 indicators, however, do not yet suggest an early recovery for the global economy.

* However, we expect Indian economic growth to remain resilient, with a worst-case GDP growth estimate of over 4% in FY10. Our worst-case fair value for the Sensex is 8,000 (FY10 end) at 10x FY11E worst-case EPS.

* Our recommended strategy is to be overweight domestic-focused sectors: telecom, industrials, consumer discretionary, and BFSI

* Our top large cap picks are Bharti, BHEL, Crompton, Hero Honda, HDFC Bank, SBI, Sun TV and Suzlon.


To see full report: INDIA STRATEGY