In his latest report, Morgan Stanley's Stephen Roach says the correction in global markets led by risk aversion, is likely to continue for some more time.
According to Stephen Roach there is risk aversion behind global rebalancing and there is a shift in the liquidity cycle. Financial markets have not yet seen the end of this impact.
Liquidity-driven asset bubbles and global imbalances are key factors to look out for. Global rebalancing, dollar depreciation and tighter monetary policies are also factors to consider. Monetary tightening and adjustment in the US housing market will reduce the US current account deficit, says the report.
Adjustments in world financial markets have been painful, but orderly. Developed world equity markets have remained within a 10% correction band, while liquidity driven bubbles saw deeper correction.
The risk appetite indicator suggests that the risk aversion move is short by historical standards. The Fed should continue to surprise markets with its tightening bias.
In his report, Stephen Roach says that Risk aversion trade could have more to go, and expects more tightening to come in on the Chinese front as well.
Will FMCG be the new flavour of the season?
As the market continues its volatile journey under the influence of global market movements, which sector could emerge as a safe haven in the Indian market?
The market is on a rocky terrain, which has made it volatile and uncertain. These are times when majority of the investors want to know which sector is best to invest in, and will provide sure shot gains.
According to a recent report by SSKI research, FMCG is the sector to bet on. The report highlights the fact that the FMCG sector, which was initially witnessing single digit growth from FY00 to FY05 has seen strong double digit growth in FY06.
Since consumer spending and disposable incomes in India are on the rise, FMCG is one sector, which will be a definite beneficiary of this.
The report also reflects on the fact that the inorganic route to power will be the next round of growth. It says that high cash generation from the core business and no major capex plans on the cards has prompted FMCG players to take the inorganic route. Companies like Dabur, GCPL, Marico, Tata Tea, etc are targeting to add atleast 10% to their topline annually through the inorganic route.
Also few businesses are now on a structural upward move. In the current context of growth being led by 'uptrading', SSKI believes that a structural upward move should be looked at in certain businesses.
For example; ITC's core cigarettes portfolio, Nestlé's urbanized product line, and GCPL's inorganic appetite and a burgeoning hair colour business is what SSKI would like to bet on.
Given the high earnings visibility, they believe the consumer space will continue to command strong valuations. They have factored in the overall cash on book and potential utilization of the same in this report.
No comments:
Post a Comment