Slowing corporate growth, general election to impact.
Ravi Ranjan Prasad
Mumbai, Dec. 11 The pressure on Indian equities is likely to continue in the
first half of 2009 with the outlook for corporate profits in the coming
quarters remaining gloomy as growth slows down, say foreign investment banks in
their outlook reports for the coming New Year.
The financial firms expect no upside in the market in the first half; this is
also partly due to the forthcoming general elections. But the reports say the
Sensex will scale higher levels after the elections should there be a clear
verdict.
Credit Suisse's Asia strategy report says the Indian economy would grow between
5 and 6 per cent and that corporate earnings growth would be negative in FY09,
and flat in FY10.
"For corporate India, the slowdown impact is likely to become more tell-tale
into the year. The impact of the slowdown on corporate earnings is showing, the
profit for the first half of FY 2009 were flat and the second half of FY 2009
could be worse," Credit Suisse report said.
"The markets may re-visit 9,000 on the Sensex again and again ahead of the
elections in the first half of 2009," the report said.
"In the second half of 2009, the market could rebound sharply if the general
elections end with a conclusive result and a reformist government. Otherwise,
the market could remain at the bottom of range valuations, with the Sensex
around 9,000 for a while."
"The next general elections are important for the market. If we get a
fragmented verdict from the electorate, it could hamper policy making, which in
turn could have implications on growth," said another report by Morgan Stanley.
"The key risks to a strong rebound in 2009 are continued forced selling driven
by redemptions from both hedge funds and long-only investors."
Merrill Lynch
Another foreign investment bank Merrill Lynch also holds a bearish view on the
markets and expects GDP growth to slow to 5.8 per cent in FY10. It has forecast
growth of 7.5 per cent for FY09.
"We continue to be bearish on markets and expect the Sensex to hit 7,000 in the
first quarter of 2009 as earnings get downgraded and drag valuations to
historic lows in terms of PE multiples going below 8," said Merrill Lynch's
outlook on the Indian markets for 2009.
Morgan Stanley
"The bear market is likely to continue in 2009, the Sensex could move in a wide
range in the coming 12 months, though our view is that the market is biased for
flat-to-downside rather than upside. Our probability weighted Sensex outcome
for December 2009 is 8,559," said the Morgan Stanley research report.
Morgan Stanley sees the Sensex moving in the range of 14,225 on the higher side
and 6,355 on the lower side in the next 12-month period.
"If earnings fall in the coming quarters, it should not be a surprise, we
expect broad market earnings to decline by 15 to 20 per cent in FY10 and return
on equity to decline from 22 per cent at its peak to 16 per cent in the coming
18 months," the Morgan Stanley report said.
http://www.thehindubusinessline.com/2008/12/12/stories/2008121251791000.htm
I keep six honest serving-men (They taught me all I knew); Their names are
What, Why, When, How, Where and Who.
-- Rudyard Kipling
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