Investment banking and financial services group CLSA Asia-Pacific Markets has advised investors to avoid Indian stocks that are dependent on government policies. According to a Bloomberg report, policy paralysis has been the major reason for India’s slowing GDP growth, industrial production and abating consumer confidence.
?Government has been hamstrung and house not in order… Dislike sectors dependent on government policies such as infrastructure, real estate, capital goods, telecom,? the Bloomberg report quoted CLSA’s India research head Anirudha Dutta as saying in an interview on Tuesday.
Dutta’s statement comes at a time when all these sectors are in the doldrums with companies in dire need for capital but investors not keen on committing any fresh investment. According to exchange data, BSE Capital Goods index has given negative returns of more than 6% for the last six months compared with positive returns of almost 1% given by Sensex during the same period. Further, the realty index is down 15% in the last six months.
CLSA’s Dutta is of the view that overseas funds remain optimistic on India’s growth story that are aided by attractive valuations and easy global liquidity. Incidentally, data provided by market regulator SEBI shows that foreign institutional investors (FIIs) have pumped-in more than $12 billion in the current calendar year (CY12). This is also the highest among most leading Asian economies in 2012.
Dutta is bullish on the long-term consumption story and has listed ITC, Godrej Consumer, Power Grid, Lupin, Sun Pharma, ICICI Bank, Tata Power, Zee Entertainment as his top buys. He is overweight on private lenders, health care, consumer discretionary stocks as he feels that they may not get impacted by government policies.
Meanwhile, CLSA pegs FY13 earnings per share (EPS) estimates for Sensex companies at R1,211 compared with Bloomberg consensus of R1,259 and have set Sensex 12-month target at 18,530 (remains unchanged for last two quarters).
