Goldman downgrades Indian stocks

August 01, 2013 06:50 pm | Updated August 03, 2013 11:47 pm IST - NEW DELHI

Goldman Sachs, on Thursday, downgraded Indian stocks to underweight, and recommended investors to stay selective on concerns of economic growth recovery.

“The investment case for India has turned less favourable. Growth recovery looks elusive, macro vulnerabilities are rising and positioning remains extended,” the bank said in a research report.

“We see further earning cuts and limited room for re-rating. We downgrade India to underweight and recommend investors to stay selective,” it said.

The report, however, favours export-facing sectors, strong balance sheet companies and thematic alpha trades.

On Wednesday, Finance Minister P. Chidambaram had said he expected the economy to grow between 5.5-6 per cent in the current fiscal on the back of global challenges and slowdown in investment.

Goldman Sachs noted that recent activity data has been sluggish with no signs of a pick-up in investment demand. The external funding environment has also become more challenging causing the RBI to tighten liquidity.

Rupee may remain under pressure and the RBI may keep liquidity tighter for the next 3-6 months, it said.

The overall earnings sentiment remains weak, notably in the investment cyclical and capex-related sectors.

The report expects earnings to grow 5 per cent and 11 per cent this year and next, which is below consensus expectations.

It also expect sales growth to moderate further and margins to remain under pressure this year compared to consensus expectations of a margin expansion.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.