Time ripe for bargain hunting in scrips, says Credit Suisse

Credit Suisse has upgraded its ratings on NTPC, Cairn India & Ambuja Cements, while cutting weight on Hindustan Unilever

Even as various scrips have been sliding for quite a while, experts suggest selective buying.

The benchmark exchange indices, the Sensex and the Nifty, have slipped nearly 10 per cent from their January highs. The hit in the mid- and small-cap spaces has been more severe, with the S&P BSE Mid-cap and S&P BSE Small-cap indices tanking nearly 13 per cent and 18 per cent, respectively, during this period.

Despite all the concerns and the macro-economic situation, analysts at Credit Suisse suggest investors consider selective buying. "Though the current correction has been broader than those seen recently, select stocks are starting to look attractive," says a Credit Suisse India Market Strategy report by Neelkanth Mishra and Ravi Shankar, issued today.

"We have been flagging the deepening and broadening slowdown for a while and do not expect any meaningful recovery in investment or middle-income consumption anytime soon. But we also believe a crisis is unlikely: bargain-hunting selectively makes sense," they observe.

In some of the beaten-down sectors, some good quality stocks are now showing value, the report suggests. Analysts at Credit Suisse have upgraded their ratings on NTPC, Cairn India and Ambuja Cements, while cutting weight on Hindustan Unilever.

Broader markets
The Indian market has underperformed global markets in each of the past five months, in both dollar and local currency terms. This has continued in April and the Indian market remains in the bottom quartile. Against markets such as Brazil and Indonesia, the relative price to earnings (P/E) ratio is at decadal lows.

Only against China is the market more bullish on India on the P/E, the report says. While the current market correction has been more broad-based compared to the two previous ones from near-term peaks, the outperformance has been restricted to fewer stocks. The best performing sectors, by Credit Suisse's analysis, continue to be defensives such as staples, healthcare and information technology. Industrials and metals were at the other end of the spectrum.

"We continue to expect highest downside in financials and industrials. We have already flagged our preference for stocks like Tata Motors, RIL, Sterlite Industries and Bank of Baroda earlier. While we expect some upside to the broader market over the next 12 months, it may be range-bound near-term," the report adds.