The reward-risk balance for the Indian stock market is less favorable after the sharp run-up in prices of several domestic cyclical and PSU stocks in the past two weeks. Current stock prices already discount FY2015E EPS for most large-cap. stocks under our coverage. Earnings upgrades will largely depend on favorable government action in a few sectors, which itself is predicated on a favorable outcome of elections and continuation of economic reforms. We make a few changes to our Model Portfolio to factor in the recent diverse movements in sectors and stocks.
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