L&T order guidance proves abysmal investment climate in India.

Last week, US and European markets ended on a positive note.

The rally was on the back of increased expectation from forthcoming European Union leader’s summit. Though, top European leaders are repeatedly saying that full solution to ongoing euro debt worries will take more time. But market participants are expecting concrete measures particularly in regard to containing contagion in case of Greece default. 

 

Nifty for the week however fell by 1.6%.

 

Sentiment turned bad particularly after LNT declared its quarterly results. Though result was in-line with expectation, shocker was very poor guidance of order growth of only 5%. This clearly suggests that Macro Economic Investment scenario in India is in a very poor state and if remains so for more time, it may damage the structural India growth story. Already some global analysts are talking of Indian P/E de-rating. Though we do not agree with this logic. We expect investment cycle to turn positive in India from Q4FY12. Portfolio wise, we remain underweight on capex related companies till govt. takes clear policy initiatives.

 

This week though a truncated week would be surrounded by lot of news flow like RBI credit Policy, EU meetings and F&O Expiry. Traders need to be very watchful.

 

Amongst major quarterly results declared last week,

 

   

FV Target

For 12 m

RELIANCE

BELOW

           932

            835

BAJAJ-AUTO

BELOW

        1686

         1,641

TCS

BELOW

           1086

         1,048

LT

In-Line

        1473

         1,336

HCLTECH

In-Line

           510

            412

HEROMOTOCO

BETTER

        2154

         2,052

HDFCBANK

BETTER

           522

            486

HDFC

BETTER

           725

            634

 

 

Amongst large stocks that will declare results during this week:

We expect

 

 

 

SALES

PAT

Company

YOY(%)

YOY(%)

STER                          

61.4

65.7

ITC                              

17.3

19.9

NTPC                          

(1.1)

12.9

GAIL                           

9.9

18.0

DRREDDY                  

5.5

(18.9)

SESAGOA                  

6.2

(24.4)

MARUTI                     

(16.4)

(33.7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technically our market view remains same as of last week. A sustained rally may come only if Nifty closes decisively above resistance zone of 5170 – 5220. But if Nifty fails to cross this level, we may trade back to lower level of current trading range of 4700-5200.

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