MUMBAI, January 23: Forecasting a bullish outlook for India, securities firm DSP Merrill Lynch Ltd said that investors should buy into Indian stocks because long term positives outweigh short term risks."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. It said from second half of 1998, a more stable government will kick off growth especially in the infrastructure sector and lead to economic recovery.
A low current account deficit of about 1.5 per cent of gross domestic product (GDP), low short term external debt of less than four per cent 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 per cent of GDP coming from exports," the report said. "In a scenario of slowing economy worldwide, this should ensure sustained growth due to under built domesticcapital stock."
However, slowing world trade would lead to earnings downgrades. "We expect EPS (earnings per share) growth for the BSE Sensex to be 5-6 per cent in FY98 (fiscal year ending March 31) and 11-13 per cent in FY99, though bottoms-up forecast is presently higher," it said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
