Market Call - Is it so?
Despite bullish stance in US market and European market, Indian Market fear to take queue in conformity with decoupling theory. The foreseen factors are dragging of India Inc’s profits and FII’s selling mode. Clearly, market is discounting the lower estimation of EBIDTA of India Inc in 2011-12. The market is not taking a sharp turn downward as the consumption story of India still plays. Market still believes that growth will be intact. But due to rising input costs and high interest rates will affect profit by contraction of their margin of the company. Again, companies do not have free pricing flexibility in India and they are bound to absorb a part of rising costs. However, this is not the trend to follow across the sectors or market as a whole.
Under the foreseen investment horizon, what to bet and where to bet, is crucial decision to be taken. Thus, one should be sector specific. Sectors to avoid: cement, real estate, textiles, shipping, auto and realty. Sectors to own: oil companies, mining & metal, exports driven sectors.
As the time will pass by, the picture will be clearer and more sectors will surface under the scanner. Infrastructure & capital goods sectors will take their turn depending on expenditure by government in coming days.
It is likely that banking sector will manage their NIM and will continue to show growth in both top line and bottom line because of strength seen in some of the sectors.