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HSBC has revised its Sensex target for CY-13 to 20,700. At the same time, the foreign brokerage firm has upgraded India to overweight from underweight earlier on the back of realistic GDP growth, earnings growth and monetary easing expectations. HSBC, in a report dated July 19, 2013 said that India would also see higher growth as a result of the downward revision of growth expectations in the North Asian region.
“With growth concerns now more severe across North Asia , we believe India looks relatively better placed in a regional context, alongside ASEAN markets – Malaysia, Singapore and Indonesia. Our year-end 2013 index target is 20,700 – 3% above the current level (14x CY14e PE),”said the report titled ‘India Equity Insights Quarterly’.
HSBC has lowered its China 2013 GDP growth forecast to 7.4% from 8.2%, said the report authored by Jitendra Sriram and Herald van der Linde .
Jitendra Sriram is equity strategist and head of research, India at HSBC Securities and Capital Markets. Herald van der Linde is head of equity strategy, Asia Pacific at the Hongkong and Shanghai Banking Corporation.
The dwindling of the QE – the US’ loose monetary policy – should not be a concern for India despite its twin deficit worries, said the report. “Our economists expect current monthly Fed purchases of USD85bn to taper off at end-December to USD60-55bn in January 2014, before going to zero by the end of 2014. Further, the Bank of Japan’s expansion of its balance sheet is yet an unknown, which could largely compensate for the Fed’s unwinding of liquidity. As a result, we think risks to flows are unlikely in the near term,” said the report.
HSBC, in its report, said that given the rupee weakness, export-oriented stocks continue to remain favourites. The brokerage firm is overweight on health care sector, IT and dollar-linked P&L (Profit& Loss) heavy stocks such as ONGC and Cairn India in energy, Hindustan Zinc in metals . Local exposure for the firm is through private financial companies such as HDFC, ICICI Bank and consumer companies such as Titan, Colgate-Palmolive.
“We would play the reform theme via utilities (NTPC, Tata Power), though ONGC also is proxy for reforms in diesel and gas pricing. We are negative on state-owned banks such as State Bank of India, consumer names such as Nestle India, and auto names such as Hero MotoCorp,”said the report.
