BoA-ML adds JP Associates to Indian model portfolio

Says a fall in interest rates will help high-debt cos such as the engineering and construction firm

Bank of America-Merrill Lynch has added Jaiprakash Associates to its model portfolio, saying a fall in interest rates will help high-debt companies such as the engineering and construction firm.

Jaiprakash's possible spin-off of its cement unit could be another near-term catalyst, BoA-ML adds.

The investment bank also replaces Sun Pharmaceutical Industries with Dr Reddy's Laboratories in its portfolio, citing their diverging share price performance.

BoA-ML says Dr Reddy's recent under-performance has made valuations "much less expensive" at 17.6 times fiscal 2013 EPS vs 22.8 times for Sun Pharma.

Dr Reddy's also has potential near-term triggers because of anticipated US drug launches.

 

However, more broadly, BoA-ML says expects range-bound trading in Indian stocks, with possible correction in the corporate earnings reporting season.

Investment bank remains "wary" of "expensive" consumer stocks.