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Domestic indices will take cues from overseas markets next week, as they will reopen after an extended weekend. However, investor sentiment would be negative given the sharp rise in India's current account gap. The higher-than-expected current account deficit for Oct-Dec at 6.7% of gross domestic product compared with 4.4% a year ago and 5.4% in Jul-Sep may make investors jittery.
The market's attention has shifted to the challenges facing it, but the fact is that the earnings cycle appears to be turning. Even with all the possible troubles in the globe, global liquidity remains extremely favourable for Indian equities. Indian valuations appear to be attractive. Our models are suggesting between 20-40% upside to equities over the coming 12 months.
Action will be stock-specific next week as well, with auto and cement shares taking cues from their March despatch figures. IndusInd Bank and NMDC will be in focus, as they will replace Wipro and Siemens in the Nifty index from Monday. Sterlite Industries India will also be watched, as the Supreme Court judgement on the company's plea challenging a Madras High Court order for closure of its Tuticorin copper-smelting unit is due on Tuesday.
Aurobindo Pharma may extend gains, as the US Food and Drug Administration lifted the import alert on the company's cephalosporin Unit VI at Hyderabad.
We expect continual improvement in fundamentals driven by new Unit IV approval, resolution of US FDA issues of Unit VI, better business mix and tight control at operating level.
APL (Aurobindo Pharma) is currently trading at a deep discount to its peers and even to its historical PE (price-to-earnings) multiple of ~12x (6 years' average). We expect valuations to catch up on improving outlook.
