Post Correction – FII India Equity Strategy

Post Correction of 10% in Indian Equities, FIIs are weighing their Equity Strategy in India and their Long Term Investment Outlook. Before we present to you about their Strategies, we are just little over 2 weeks away from the second budget by the new Government – so this month will be a month of volatility. We have always advised you to BUY on correction [dalalstreet on twitter] and maintain the same tone – BUY.

So far into Q3, FY10 results Media, Banks, Telecom, IT have been positive while Power, Engg, O&G, Construction have been lacking somewhat. UBS Investment Research in a note has said,

March 2011 BSE Sensex target marginally up to 21,000 (20,000 earlier). BSE Sensex is currently trading at forward PE of 14.2x and forward P/BV of 2.5x. We expect earnings growth in FY2011 to be 22.8% followed by 18.9% in FY2012. We expect earnings growth in FY2011 to be led by growth in earnings in real estate, metals, pharma, petrochemicals, capital goods, autos, banks and consumers.

According to UBS, Sensex EPS expectations is as follows,

  • FY10E INR 946
  • FY11E  INR 1,161
  • FY12E INR 1,380

Citigroup says that it was a Decisive Decade – The really big picture is that India Market Cap of BSE500 has gone up from $183bn to $1225bn and Foreign Ownership from 7% to 17%.

Institutional ownership in general, and foreign in particular, remains
concentrated in large-cap stocks, partly due to the higher float in them. So participate in select IPOs and buying Midcaps which become the large-cap of tomorrow and create wealth. If your investment corpus, opt for the Mutual Funds Route but Equity is the best asset class to create wealth and have major exposure here.

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