[T.S.R:16797] UBS: A mere $4-5Bn in FII Sales Will Take Nifty To 4500, Sensex to 15000. This Is The Level That Indian Investors Should Seek

UBS: First Sell, Then Ask The Reasons

There's an Old Arab saying, "Beat Your Wife Every Morning. If You Don't Know The Reason She Will". So first forget becoming an investor and dump all your stocks, then look for the reasons.

Several concerns worry investors 

Nifty and Sensex have fallen by 10% 2011 ytd on concerns such as high inflation, high crude oil prices, lack of progress in govt reforms, fear of populist moves by Indian govt in the wake of 5 state elections scheduled in May. We believe that while higher inflation may be partly priced, we are yet to see significant selling by foreign institutional investors yet. FII selling can take markets down by 10%-15% more, in our view. We will see any decline in stock prices as a buying opportunity to invest in attractively priced growth stocks. 

How low can Sensex and Nifty go?

We believe that earning estimates for Sensex and Nifty could be revised down in the coming months. Assuming some downward revision of around 5% (implying 12.5% FY12 earnings growth) and applying a 12.5x P/E multiple we feel that Sensex and Nifty should find support at 15,000 and 4,500 respectively. We believe if we see US$4-5b of FII selling, then Indian markets can correct another c15%. 

What stocks/sectors to invest in a correction?

We are positive on India in the medium term due to (1) Favorable demographics and (2) Low penetration of products and services (3) Stable government that is likely to push through reforms in a steady manner over the medium term. We therefore urge investors to take advantage of market correction to buy high quality growth stocks at reasonable prices.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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