[T.S.R:16963] India: Underweight (Citi)

 

India – Underweight

We downgrade Indian equities to Underweight again from Neutral within a GEMs portfolio. After another strong run in 2010 (+19.4%, a modest outperformance of the global benchmark), we expect returns to moderate in 2011. Higher oil prices and related commodity price inflation is having a detrimental effect on profit margins and hence the outlook for earnings growth.

In mid-year, our economists expect inflation, at last, to moderate back towards the 6% range which will ease some concerns regarding monetary tightening and allow the market to regain some poise. However, we still expect interest rates to rise by a further 75bp this year. All users of commodities are at Risk of Downgrade in Earnings Estimate. Long Energy.

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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