In a somewhat very surprising move, Credit Suisse Research has sent tremors with FIIs and other P-Note account holders by downgrading India Directly to Underweight from Overweight.
Credit Suisse in a research note said that on P/BV versus ROE valuation model, China H currently trades at a 25% discount to the region, higher than the 17% discount seen after the second RRR hike in April 2004. In contrast, India currently trades at a 3% premium to the region, compared with a 26% discount during the first CRR hike in September 2004. They also expect the Government to Raise taxes in the upcoming Budget in February and Raise repo rate in March or April.
Sell Cyclicals and Rate Sensitive Sectors – they tend to underperform in a rising interest rate environment. India consumer cyclicals are trading at a 67% premium to the region, real estate at 24% and materials at 7%.
NOTE: I would like to add this is somewhat a knee-jerk reaction like that of infamous Morgan Stanley Analyst Andy Xie for similar report on India [eventually fired from the position] Do NOT SELL in Panic, use the correction as an opportunity to BUY selectively.