The Hindu Business Line : Target prices of India Inc weighed down

Chennai, Nov. 10 The stock market turmoil might have prompted some downward revision in stock prices but global brokerage houses are bullish on quite a few Indian stocks.

The revised price targets for these stocks range from 10 per cent to almost 130 per cent above current market prices (CMP).

“Price targets have seen a significant correction, and this is because of the downturn in the markets,” said Mr Arindam Ghosh, Chief Executive Officer, Mirae Asset Global Investment Management (India) Pvt Ltd.

Fear factor

A fear of the current tempo of earnings growth moving at varied paces is driving prices down and causing analysts to re-visit market numbers, according to Mr V.K. Sharma, Head (Research) at Anagram Stock Broking.

The downward revision is across various sectors from metal to bank to energy. However, target prices of major players in the metals sector were among those facing the biggest cuts.

Severe falls

For instance, Goldman Sachs corrected its stand on Sterlite’s target price by 56.62 per cent to Rs 403 (CMP Rs 279.20) and chopped that of Tata Steel by 77.23 per cent to Rs 255.01 (Rs 214.45), in line with an almost 50 per cent fall in its stock price.

“Currencies undergoing a sea change in values is one of the factors responsible for the rapid falls in the commodities market. The steel sector is seeing a relatively slow growth due to the current slowdown in Chinese demand,” said Mr Sharma.

Companies that saw a revision in the 25-40 per cent band include Reliance Industries, Lanco Infratech, and ICICI Bank.

Smaller revisions

HSBC revised its targets on Reliance by 26.66 per cent, taking into account the de-rating of the market and the dilution of equity base. However, it reiterated “overweight” rating on the company. JM Financial maintained a “buy” tag on Infosys Technologies, revising its price target to Rs 1,515 (CMP: Rs 1,338.30).

“Sectors such as IT are transparent in their approach, and so have steered clear of giving the market any negative surprises,” said Mr Sharma.

Holding ground

However, despite the negative trend a few companies such as ITC Ltd and Bharti Airtel managed to hold ground at their current target prices. Citigroup reiterated its target prices for ITC at Rs 222 (CMP: Rs 172.40), Glenmark Rs 770 (CMP: Rs 336.75), and Bharti Airtel at Rs 1,070 (CMP: Rs 709.35), while Credit Suisse stuck by Rs 688 (CMP: Rs 297.75) for UTV Software.

Market trend

“A downward swing outlasts most other market conditions, so it may be another six quarters or so before a bull run can be expected to take over,” said Mr Ghosh.

Better days after 2009

According to Mr Sharma, things could start to look up only from June 2009, or even later. “Though a few sectors such as real estate are still maintaining a brave face, there is at least another two quarters of price reiterations that are expected to take place,” he added.

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