Indian stocks could return about 20% in 2012 on the back of
lower interest rates, improved reforms and cheap valuations, said Aviral Gupta,
equities fund manager at Indiabulls Mutual Fund.
"There's negligible shock-value in the system now. We
expect things to improve on both global and domestic fronts going
ahead,"" Mr Gupta said.
Mr Gupta expects a slew of policy reforms post the Assembly
elections. He expects the government to increase allocation to infrastructure
sector and continue with its rural development programme, despite the huge
fiscal deficit.
"Government will restart reforms post-election. We
expect several infrastructure projects to be commissioned post March this year.
The government will continue with its rural development programmes like
NREGA... This will support the rural consumption story in a big way," Mr
Gupta said.
Mr Gupta does not expect too much of negative news-flows
from Europe and US. "Eurozone negative shock-value has come down
significantly from last year... Data from US is largely positive. Their big
worries - housing and unemployment - seem to be bottoming out already," Mr
Gupta said.
Rate cuts and lower inflation numbers will drive up Indian
shares in the coming months, Mr Gupta said. Falling commodity prices coupled
with low interest rates and increasing demand will help Indian companies to
improve their earnings, Mr Gupta said.
Mr Gupta is also comfortable with current stock valuations.
The Sensex is currently trading at 11 - 12 times forward earnings multiple -
much lower than historical average of 15 - 16 times forward earnings.
According to him, barring telecom and power, which will
continue to face strong headwinds, investors can buy frontline companies in any
sector. Mr Gupta is bullish on IT, banks, FMCG, pharma and other rate
sensitives.
Foreign portfolio investors too, seem to have turned positive
on Indian stocks. Strong third quarter results from private lender HDFC Bank
and two wheeler makers - Bajaj Auto and Hero MotoCorp - contributed to the
upbeat mood, boosted by foreign institutional buying to the tune of Rs 630
crore on Thursday. So far in 2012, these investors have pumped in over $1
billion (Rs 5,023 crore), compared with $385 million of net sales in the whole
of 2011.
However, according to a recent survey conducted by Bank of
America Merrill Lynch (BofAML), emerging market fund managers continue to
remain underweight on India. About 61% of the fund managers polled said they
were not comfortable investing in Indian equities. Emerging market fund
managers have been underweight on India for 17 consecutive months, the BofAML
survey said. Brazil, China, Indonesia, and Russia continued to be consensus
'overweight' among foreign investors.
Source: http://articles.economictimes.indiatimes.com/2012-01-20/news/30647358_1_aviral-gupta-indian-equities-fund-managers
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