Citi: Financial risks may hit earnings
Citigroup Investment Research that is currently holding the India Investment Conference in Mumbai said the response has been positive despite a slump in the markets.
Aditya Narain, director and head-India, said that there was no scale back of any earnings estimates for Indian companies except for event based re-ratings. He warned of financial risks, risks emanating from investments in equities and foreign exchange hedging to affect earnings in the current quarter.
“We remain overweight on telecom, consumer and IT, though the jury is still out on the IT sector earnings and growth," Narain said.
Capital goods is a sector that the group has downgraded from overweight to neutral because of the run up in valuations and also a possible slowdown on the capex side. Citigroup is currently underweight on the utilities and power sectors.
Citi economist Rohini Malkani said the group expects GDP growth to slow down to 8.3 per cent, but said there should be no fears of a slump in the economy. She said inflation should moderate to 4.5 per cent and the
Reserve Bank of India is likely to cut interest rates by 50 basis points in fiscal year 2009.
Adrian Faure, managing director and head Asia Pacific, said the full extent of global credit market woes – and how it plans out — is still unclear. "Excesses of the last few years are being taken out of the economy, balance sheets and markets," Faure said.
The froth built up on stock pricing must be wiped out as early as possible since it is better for the markets, he added in a reference to the current phase of correction in equity markets.