There is a bit of a stand-off between the bulls and the bears on what to make of a two-day rally in the Indian stock markets.
Credit Suisse Securities India is taking the view that Sensex has some way to go before it bottoms out.
“Our house view is that the Sensex could touch 11,500 levels in the short-to-medium term,” said Mihir Doshi, managing director and country head, Credit Suisse Securities India, which restarted its Indian broking operations on Tuesday.
This, even as Credit Suisse expects India’s gross domestic product growth to be around 10% for 2007-08, at the high end of such expectations among brokerage houses.
Over at UBS Securities, there appears to be new-found optimism. In an Asia strategy report out Monday, UBS upgraded India from “underweight to neutral position.”
UBS cites three major reasons for an upgrade. First, Indian stock markets’ premium in the Asia-Pacific region (ex-Japan) has come down from 31% in October 2006 to just 5%. Second, India is no longer among the most overvalued markets. Finally, the consensus earnings per share (EPS) estimate for firms was upgraded by 2.4% in February and 0.6% in March.
“The key point for us though is, while other markets (markets like Singapore and Malaysia) are also associated with a strong uptrend in consensus EPS revisions, only India has a strong uptrend from a high EPS growth number in the first place,” the report notes. It expects Indian companies to register an EPS growth of 26% in 2007 and 23% in 2008.
But those sitting in the dealing rooms of brokerages are not very enthused about the two-day market rally.
“It’s still a range-bound market and this rally hasn’t brought much of relief or cheer for investors. Until we see the expiry of March futures next week, we may continue to see a range bound movement in the markets,” says ICICI Securities vice-president C.K. Narayan.
Nihal Oza, vice-president of Bric Securities, says the only difference in this two-day rally is that people in his dealing room have started looking at the trading screens.
Until last week, when the markets were witnessingonlya one-way move—southwards—he would see his dealers taking frequent coffee breaks even during the trading hours.
Sensex, the 30-stock index of the Bombay Stock Exchange, gained 0.48% to close at 12,705.94, led by gains in cement, commodity and healthcare stocks. The 50-stock index of the National Stock Exchange, S&P CNX Nifty gained 0.51% to close at 3,697.60. Mid-cap stocks led by mid-cap banking and cement stocks, were the biggest gainers.
The CNX Midcap Index and Nifty Junior Index gained by more than 1% to close at 4,722.65 and 6,622.25. The BSE Mid-cap index was up by 0.85% to 5,331.39.
As per the provisional data from NSE, foreign institutional investors were net buyers, buying stocks worth Rs147 crore.
Some of the Asian markets also showed signs of bounce-back. Malaysia’s key index KLSE Composite climbed 1.1%, Singapore’s Straits Times Index gained 0.11% and Thailand’s stock index rose 0.24%.