Brokerage Forecasts for 2009

ENAM Securities:

Q1 of CY 09 insurance purchases of $5 bn, saw a marketvertigo as it moved from severe undervaluation to a stress-case valuation level (8 to 12K). As we entered mid-CY 09, an invigorating new Govt & global macro realignments brought the “West to East” theme into
sharper focus. Markets entered a scattered-buying “return to Sanity” period. And by Diwali 09, we have entered a whole new World-view. Hence, the Price-Nadir was Nov 2008!

Forecasts Sensex at 15109 by Nov’09.

BNP Paribas:

Our bottom-up estimates indicate 8-9% EPS growth for Sensex in FY09 and FY10 (despite Reliance’s new businesses kicking in), followed by 13-14% growth in FY11. Our growth estimates are one of the lowest on the Street.

Our bottom-up target for Sensex is 10,000 – 11,500 by end of 2009. Current valuations (P/E of 10.5x 12-month forward, P/BV of 1.9x) appear reasonable, though there are cheaper markets in the region.

In 2009 investors should focus on rate-sensitive, free-cash generators and commodity users. Pharmaceuticals and consumers should do well owing to inelasticity of demand in these sectors to domestic economic conditions.

Avoid sectors where global slowdown is dragging down demand growth, or those needing large external financing.

Kotak Institutional:

“We find the valuations of Indian market (BSE-30 Index) inexpensive at 10.1xFY09E and 8.8xFY10E. Adjusted for valuation of “embedded” assets, we find valuations attractive at 8.3xFY09E and 7.3xFY10E. Our band for BSE-30 for CY09 is 11500-14500 based on a bottom-up aggregation of the fair value of individual stocks.

Merrill Lynch:

Expects Sensex to fall to 7000 in Q1CY09. Late 2009 can see better markets.Sector strategy – Barbell portfolio. We continue with a barbell sector strategy that is largely defensive. We expect to get less defensive in the later part of 2009.

Our favored sectors are telecom (Bharti), pharma (Glenmark), auto (Hero Honda), banks (SBI, ICICI) and industrials (BHEL)

Morgan Stanley:

We think that Indian equities are hurting because of impending earnings risk, a liquidity and BOP problem, a relatively sizeable NPL cycle, political uncertainty and rich relative valuations. This is best summarized in our top-down EPS forecast for the Sensex EPS, which calls for an 8% decline over the next two years versus a 21% rise as per consensus. Our view is that the market is biased for flat to downside rather than upside. Our probability weighted Sensex outcome for Dec’09 is 8559.

We are cautious on cyclicals and rate sensitives and positive on defensives with a 12-month view. Our biggest overweight positions are consumer staples and healthcare whereas our biggest underweight positions are industrials, financials and materials. We are removing Arvind Ltd from our portfolio and adding Cipla. Our favourite stock is HUL.


We factor in 5%/0% EPS growth for FY09/10E and assume a trailing 12 month recovery PE of 15x to arrive at our Sensex target of 13500. Our most preferred stocks are Infosys, Bharti, Hero Honda, ICICI Bank, PNB and Idea. Our least preferred stocks are HCL Tech, HDFC Bank, SBI, Rel Power and Tata Motors.


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