If you missed the equity bus last month then don’t worry, there is plenty of upside still left in Indian markets which makes it a buy even at current levels.
The Nifty50 which has already rallied over 26 percent to touch a fresh record high is on its way to surpassing Mount 11,000 in the year 2018, which translates into an upside of over 11 percent.
Goldman Sachs in a note last week remained overweight on India and raised the target for Nifty from 10,900 in September 2018 to 11,600 by December 2018, which translates into an upside of 11.6 percent from current levels.
Other than India, the global investment bank maintained an overweight stance on China and Indonesia. It has a market weight recommendation on markets such as Hong Kong, Korea, Taiwan, Thailand, and Phillippines. It has an underweight rating on Australia, Singapore, and Malaysia.
We reaffirmed our strategic overweight stance on India post the bank recap news and raised our Nifty target to 11,600 (by end-’18). Within sectors, we raised PSU banks to overweight and highlighted 2 themes: 1) quality PSU/quasi-PSU banks; 2) infra-beneficiaries.
The global investment bank favours PSU banks and infra beneficiaries. Goldman has a neutral rating on SBI and Bank of Baroda. It maintained a buy rating on ICICI Bank.
The government recently unveiled a Rs 2.1 lakh crore, (representing 1.2 percent of GDP), recapitalisation package for public sector lenders which will be injected over two years.
The capital infusion will be funded through three sources -- Rs 18,139 crore from budgetary provisions, Rs 58,000 crore from the market as the government dilutes its stake and Rs 1.35 lakh crore through recapitalisation bonds issued by the government.
“We believe a robust recap plan could potentially fast track NPL resolution in the system and improve growth prospects by easing capital constraints to segments such as SMEs. In our view, corporate-oriented private-sector banks such as ICICI Bank seem better placed to benefit from this theme than SOE banks given more comfortable capital adequacy and retail franchise strength,” said the report.
Although historically recapitalisation has driven valuations for weak banks higher. It maintained a neutral stance on State Bank of India, Bank of Baroda and remained SELL on Punjab National Bank.
In the sectoral space, Goldman Sachs is overweight on private/PSU banks, autos and industrials. It says MarketWeight is on oil & gas, metals, cement, utilities, and telecom stocks. Goldman is underweight on IT, NBFCs, staples, and pharma.
Top 9 convictions buys from Goldman Sachs include names like Avenue Supermarts, Aurobindo Pharma, Kajaria Ceramics, HDFC Bank, ICICI Bank, BPCL, Maruti, and TVS Motor.
MORE WILL UPDATE SOON!!
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