Slump in India Market Lures Kotak Brokerage to `Revisit’ Stocks

(Bloomberg) -- Declining share prices and rising wariness among investors is prompting Kotak Institutional Equities to recommend Indian stocks.

“The sharp correction over the past three months provides an opportunity to revisit stocks,” Sanjeev Prasad, managing director of the brokerage, wrote in a note on Monday. Investors should buy a mix of expensive consumption-related names and beaten-down shares from other industries, he said.

Investor sentiment has been dented in recent weeks as lack of stimulus in the government's budget to prop up the economy and taxes on the wealthy added to worries about the slowdown in consumption and the lingering credit crisis. The NSE Nifty 50 Index on Monday entered a correction after completing a 10% drop from its June peak.

The valuations of Indian stocks have now become “more reasonable” compared with their multi-year mean, according to the brokerage. The slowdown in Asia's third-largest economy, lower-than-estimated earnings growth and likely debt defaults due to on-going stress in the property businesses remain the main risks to its outlook.

Other recommendations from Kotak:

• Consumption-linked shares -- including high-quality financial companies -- will help investors tide over near-term uncertainty.
• Non-consumption stocks may see a “quick rebound” if global trade issues are resolved and India's economic slowdown reverses in the next few months.

To contact the reporter on this story: Ameya Karve in Mumbai at akarve@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Anto Antony, Ravil Shirodkar

©2019 Bloomberg L.P.