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Merrill’s Equity Strategy 2010 – Pick Cherries

December 16, 2009

india equity strategyEarlier BOFA-Merrill in its expectations for 2010 has said it will be the year of consolidation. In continuing its coverage on equity strategy for 2010, Merrill advises investors to pick cherries. Since company and sector performances are growing more differentiated, suggesting the market is responding less to macro economic news and more to business specifics. Thus, adopt a stock-specific approach for portfolio construction in 2010.

With the availability of incremental positive data investors must increase the weight of equities in their overall asset allocation to an overweight position. Also, investors position for an economic upturn and use any pullback to position more aggressively.

Business Outlook 2010:
The easy money that the market offered briefly in 2009 is no longer available. The classical macro concerns – inflation vs. growth, fiscal deficit vs. financial
inclusion – may dominate headlines. INR Bulls – BofAML fx strategists expect the INR to appreciate to Rs43/US$ by December 2010. Expect Emerging Markets to play a central role again in 2010, but the growth driver may change this time. As G10 countries stage their own recoveries, we expect the external demand to drive the growth.

GDP Outlook:
The economic growth should bottom out to 7.8% in FY11E. Strong domestic demand from a good harvest and higher public spending. In contrast, a faster than expected industrial recovery riding G-3 bottoming is buffering this year’s worse than anticipated drought. If monsoons normalize next year, rural revival should join rising export demand in propelling India to 8% growth in FY11E-12E.

So most of this Article is related to Macro Economic and Corporate Outlook. In the next part we will cover directly what most investors look for – Favorite Stock Picks and Stock Market Target 🙂

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