Citing lower earnings projections, foreign brokerage CLSA on Thursday slashed its 12-month projection for the Bombay Stock Exchange benchmark, the Sensex, to 17,000 from 18,200.
Over the last month, CLSA analysts have cut their Sensex earnings-per-share (EPS) estimate by one-three per cent. They now forecast earnings growth of 14 per cent and 10 per cent for the 30-stock index in FY12 and FY13, respectively.
“With our cautious stance, we continue to stay overweight on pharma and consumer,” CLSA analysts said in a note to clients. According to them, any near-term positive news flow appeared unlikely on the ‘reforms’ front.
CLSA analysts have lowered their estimates for metals, automobiles and telecommunications, taking their overall FY13 Sensex EPS estimate down three per cent to Rs 1,269.
According to them, a slowdown is visible in India. “Our India Reality Research survey reveals the post festive season dip in car purchases in November has been more than usual. Also, freight rates on certain key routes have weakened, indicating potentially slower commercial vehicle sales ahead. Growth slowdown for the organised sector, as measured by same-store sales growth, signifies some weakening in demand from the urban consumer,” they said.
Due to the ongoing slowdown, CLSA analysts have lowered their credit growth estimates for March 2012 and March 2013 to 16 per cent. They have raised their March 2014 non-performing assets ratio to 4.6 per cent from the earlier 3.3 per cent.
