ValueNotes says investors are seeking value buys in current downturn
Pune, India, 19 November 2008: ValueNotes has released the results of a poll conducted on its proprietary Indian finance portal, which captured retail investor sentiment in the current markets. The online survey evaluated if retail investors were willing to buy at current levels, given many stocks trading with single digit P/Es. Poll results indicated that 60% of the respondents were looking to buy equities in the current market environment 1.
ValueNotes research notes that the Sensex is currently hovering around the 10k mark – which it last touched in February 2006. Interestingly, the Sensex P/E currently is ~50% lower than in January 2008 and about 30% less as compared to that in February 2006 2.
While stocks across sectors have touched lower P/Es, the IT sector has seen a sharpest fall. The top four IT exporters, including TCS, Infosys, Wipro and Satyam, have witnessed a sharp decline (more than 50% fall) in their P/E values. While the earlier valuations were driven by estimates of high growth, the current P/Es have been adversely affected by a series of earnings downgrade that has resulted in a disproportionate fall in prices. The heavy engineering scrips, including L&T and BHEL, have also seen a sharp decline in their P/Es.
While a significant number of survey respondents are still shaken by the volatility, the majority (60%) opting to start buying underlines the latent strength of the domestic markets. Value investors are viewing the current market downturn as an attractive buying opportunity despite possibility of short-term growth being dampened as echoed by the RBI, IMF and GoI estimates. Adds ValueNotes analyst Ribhu Ranjan Baruah “At ValueNotes, we believe there is significant upside potential for Indian companies from current levels. Falling interest rates should prop up growth rates and while there could be more pain to come over the short-term, our long term outlook continues to remain favourable.”
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