Merill Lynch: Strong quarter, but is this the peak?

Merill Lynch is expecting corporate India to report another strong quarter with forecast headline growth in earnings of around 32.5%.

According to a report released on July 5, "excluding the extraordinary effect of Reliance Communications, EPS is expected to grow just over 25%. Growth is spread over most sectors, with software and cement being the outstanding ones. Banks and PSU oil companies (assuming there are no bonds) will likely disappoint. "

So, what can investors do ahead of results? Merill recommendations:

Buy: Software (Infosys, Satyam), cement (Gujarat Ambuja, ACC), telecom (Bharti), and industrials (BHEL).

Avoid: Financials (eg, ICICI), PSU banks (including SBI), and airlines (Jet Airways).

Switch: In pharmaceuticals, we would switch from Ranbaxy and GSK Pharma to Dr Reddy's. In autos, we would switch from M&M to Tata Motors and Bajaj Auto.

Mid caps: Buy Dabur, IVRCL, Nagarjuna, IDBI, BoI, and Shree Cement.

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