'We have been advising clients to buy Indian stocks'
Sakthi Siva, Managing Director and Head of Asia-Pacific and Emerging Markets Strategy at Credit Suisse, is brimming with optimism about the Asian region. She tells why she is bullish on Asia and India. Excerpts:
Why doesn’t India figure much in your Asia Strategy Report of July 29, where you mention Asia to be in a “sweet spot”?
We have third-biggest overweight position in India after Indonesia and Korea. In India, our largest overweight were in technology and material stocks. As these stocks have run up quite a bit, the report talks about laggards in the Asian region like the banks in China, which have been under-performing.
Having said that we have been advising our clients to buy Indian stocks on dips as we expect a 10-15 per cent correction due to the fresh equity issuances.
Does the recent run-up in Indian stocks worry you?
The best earnings upgrade has been in autos, technology and materials. But the upgrade to earnings is about 0.3 per cent, whereas in APAC (Asia-Pacific) region the upgrade is about 5.50 per cent. But India remains attractive from the valuation perspective.
According to our price to book and ROE (Return on equity) model, if we bought cheapest sectors in cheapest markets, on a 6-12 months view we outperformed 85 per cent of the times. Based on this model, the cheapest markets are Thailand, Indonesia, the Philippines and India. India is more about valuation today.
How convinced are you about the long-term story of India? Who are the main competitors?
Investors look at domestic demand stories like China, Indonesia and India in a similar way. All three economies are domestic demanddriven and were the only countries to register a positive GDP growth in 2008. The other similarity is the ratio of exports to GDP which is very low. That’s why India faces serious competition from these two countries.
