Oct. 13 (Bloomberg) -- Suresh Mahadevan, head of India research at UBS AG, comments on the outlook for Indian stocks. He spoke in an interview with Bloomberg UTV today.
The BSE India Sensitive Index rose 0.4 percent to 17,025.19 at 1:02 p.m. in Mumbai, rising for a fourth day in five and headed for its highest close since Sept. 21.
“Most of the local bad news is priced in and the rally we saw was partly due to some hopes of Europe’s problems getting resolved and partly due to short-covering. Sentiment and liquidity are driving the markets in the short-term.
‘‘We need domestic triggers for people to come and buy, whether it is inflation coming down, the central bank ending its tight monetary policy, the government pushing the envelope on reforms or crude oil prices coming down.
‘‘What may not be priced in is that if we have an external event in Europe or wherever and that results in a totally risk- off scenario and we see foreign funds’ outflows of a few billion dollars, then markets can correct further.’’
‘‘I don’t expect any big setbacks or any big positive surprises this quarter. Earnings momentum is still going to be negative, especially for FY13.’’
On sectors and stocks:
‘‘We are underweight information technology with the exception of Infosys Ltd.
‘‘If the world is in a difficult position, then I am sure the growth rates in this sector are going to come down, the price-to-earnings multiples could come off. Infosys has already corrected quite a bit earlier.
‘‘We are neutral on Infosys and marginally underweight on Tata Consultancy Services Ltd.’’
Prefers telecom stocks like Bharti Airtel Ltd. and Idea Cellular Ltd., and Federal Bank Ltd. and Mahindra & Mahindra Ltd. for their ‘‘strong fundamentals.’’
‘‘The biggest positive for the telecom sector is that pricing power has come back. It’s a big fundamental shift, which calls for a re-rating.
‘‘Bharti, being the largest player in India with a 30- percent-plus revenue market share, will emerge as a huge beneficiary.’’
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