DSP Merrill expects long-term gains in India
REUTERS
MUMBAI, January 23: Investors should buy into Indian stocks because long term positives outweigh short term risks, securities firm DSP Merrill Lynch Ltd said."We believe investors should utilise market dips and the overshooting of the rupee to increase weightage in the market," the Indian affiliate of Merrill Lynch & Co Inc said in a "India Strategy" report. The report dated January 16 was made available to Reuters on Friday. A Low current account deficit of about 1.5 percent of gross domestic product (GDP), low short term external debt of less than four percent of GDP and relatively smaller exports made India less vulnerable to the South-east Asian turmoil, it said. "India is largely an insular economy with only 10 percent of GDP coming from exports," the report said. "In a scenario of slowing economy worldwide, this should ensure sustained growth due to underbuilt domestic capital stock."However, slowing world trade would lead to earnings downgrades. "We expect EPS (earnings per share) growth for
the Sensex(or the Bombay Stock Exchange's top-30 index) to be 5-6 percent in FY98 (fiscal year ending March 31) and 11-13 percent in FY99, though bottoms-up forecast is presently higher," it said. DSP Merrill forecast the benchmark Bombay index to reach4,200-4,500 points by December. "Our year-end target for the index ...is largely dependent on a relatively more stable government which is capable of providing the confidence for investment spending," analyst Jyotivardhan Jaipuria said. India go to the polls in February and March for the second time in less than two years. Early opinion polls show a split electorate with no single party or group winning majority.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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