Brokerages upgrade cos on positive economic outlook

June 2 With the equity market gaining momentum and the country’s economic outlook looking stable, brokerages have started upgrading companies here.

Most of the upgrades have been of companies in the capital goods, oil and gas, infrastructure and real estate sectors.

Securities and investment bank Nomura revised its 12-month target price on SAIL from Rs 65 to Rs 90 a share; Goldman Sachs upped its target price for Cairn India to Rs 290 from Rs 240 a share, for Sesa Goa to Rs 180 from Rs 153, and on DLF to Rs 300 from Rs 124.

Nalco, Hindalco, L&T, ONGC, BPCL and HPCL are some of the other company shares whose 12-month target prices have been upgraded. (Some of them, such as DLF, HPCL and ONGC, have already surpassed these targets.)

BHEL, Reliance Industries and Jindal Steel were all rated as sector outperformers by Macquarie Research.

Enam Securities has upgraded Mundra Port, and Cropmton Greaves to ‘outperformers’. Motilal Oswal has maintained its ‘buy’ on Cairn India, JSW Steel, Puravankara Projects, DLF and Jindal Steel.

“The outlook for India looks quite positive now. Our GDP numbers were better than expected; we are definitely on a path to recovery. The infrastructure and power projects will get a boost with the Congress win. PSU disinvestments will also be very good for the economy,” said Mr Alex Mathew, Head of Research at Geojit BNP Paribas Financial Services.

Brokers are advising investors to be cautious about sectors such as IT and healthcare. “Looking at the global situation and our appreciating currency, one should steer clear of companies in the export sector,” said Mr Devesh Kumar, Managing Director at Centrum Broking.

The outlook for India itself has become positive. Bank of American Securities-Merrill Lynch has revised its India GDP growth estimates for FY-10 to 6.3 per cent from 5.3 per cent.

“Recent indicators of investment activity — the Purchasing Managers’ Index, cement sales, and the capital goods component of the Index of Industrial Production — are showing sequential improvement. The economy continues to have significant pent-up demand for investment, especially in infrastructure and in affordable housing. We, therefore, see upside risks to our GDP growth forecast of 5.8 per cent for FY10,” Goldman Sachs stated in a recent report.

The second half of 2009 should see an improvement in the ex-agriculture economy, reflecting the combined effects of a regional trade recovery, India’s fiscal impetus, sharply weaker commodity prices and higher oil and gas output, said HSBC Global Research.

FIIs seem to be back in buying mode now, being net buyers of equity worth Rs 13,886 crore this May itself. In 2009 they have net bought equities worth Rs 10,756 crore so far.