Goldman Sachs
India Sensex Short Term Target 12600
India Sensex December 2008 Target 10000
Back at 1Q lows: what's priced in?
With Asian equities back at 1Q lows, the key questions are (a) how
much macro risk is priced in, and (b) will fundamental risks rise? To
address this, we examine regional valuations in terms of historical
ranges, DDM fair value, and versus inflation and earnings.
Valuations should be low in current conditions
Valuations are not yet at levels that indicate risks have been fully
priced, particularly since central banks are behind the curve, oil prices
and inflation are rising, and corporate profit forecasts are likely to fall.
Lower risk/reward estimates; still cautious
We lower our index price targets and assess near-term downside risk of
approximately 10-15%. We estimate12m total return upside potential to
be low-teens. We retain our cautious stance and continue to prefer
northern Asian markets to India and ASEAN.
"Tai-rea"; tactical asymmetric China exposure
Country allocations may not be the best way to think about Korea and
Taiwan now. We favor domestic demand stocks in Taiwan and
exporters in Korea over Taiwan’s external sector (mainly tech) and
Korean domestic demand. Use HSCEI options for a potential tactical
China rebound.
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations &
outlook are included to enable a better comprehension of the Company prospects.
Actual results may, however, differ materially from those stated on account of
factors such as changes in government regulations, tax regimes, economic
developments within India and the countries within which the Company conducts
its business, exchange rate and interest rate movements, impact of competing
products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
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