Friday, 21 November 2008

Sensex to bottom out by March - Macquarie

MUMBAI (Reuters) - Indian stocks will likely bottom out by March when foreign fund selling eases and corporate confidence returns but investors should not expect any fireworks in 2009, a senior official at Macquarie Securities said.

The benchmark index should sit between 7,500 to 10,500 points from now until February, and the year 2009 would be flat with a 10 percent upside, Stuart Smythe, senior managing director and head of equity India, told Reuters.

The index had touched a peak of 21,206.77 points in early January 2008.

"I think the slowdown will persist through February," he said in a interview.

"You have got to understand you have got concerns over widespread redemptions, many have literally closed their books and said 2008 is a write-off. They are saying let's come back to see in 2009," he added.

Indian shares have fallen 56 percent so far in 2008, making it one of the worst performing Asian markets, hurt by massive foreign fund outflows amid the deepest global financial crisis in 80 years that has savaged equity markets across the world.

Foreign funds have sold a net $13.3 billion in Indian shares so far in 2008 compared with record inflows of $17.4 billion in 2007 bolstered by a five-year bull run.

"People are reassessing whether they need to be in India at all given you have developed markets and world class companies that are cheaper than Indian stocks," Smythe said.

India was a one-way bet up to January this year. Now, with all that is going on, it has become imperative for good companies to come out and differentiate themselves, he said.

There is still a strong level of interest for Indian companies that are regional or global leaders and endowed with strong balance sheets, good earnings growth, low gearing and defensible market positions, he added.

"But global liquidity and the velocity of the same, which has really driven markets, have diminished massively," Smythe said.

"We have had now four quarters of EPS (earnings per share) and margin deterioration," he said. "Margin rebound will probably be the strongest positive indicator and that will be a quarter if not two quarters away."

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