Tuesday 11 March 2008

India Stocks Unlikely to Recover in Six Months, Citigroup Says

Indian stocks, Asia's worst performers, are unlikely to recover in the next six months as mounting credit losses at global financial companies spur investors to sell equities, Citigroup Inc. said.

``It's going to be hard for equity markets to perform,'' said Hong Hong-based Adrian Faure, head of Asia Pacific research at Citigroup. ``The full extent of the credit woes are not known yet and it may take a couple of quarters until that is sorted out.''

India's benchmark Sensitive Index has dropped 24 percent from its peak 21,206.77 on Jan. 10, the biggest decline in Asia this year. Last year, the index was the third best performer after China and Bangladesh.

Citigroup and at least 44 of the world's biggest banks and securities firms have written down or lost $188 billion related to investments tied to rising defaults on subprime home loans in the U.S.

The New York-based bank is hosting a four-day conference in Mumbai and New Delhi for about 400 investors and 100 companies, Aditya Narain, Citigroup's India research head said today.

Citigroup says it has a cautious view on India and advises its clients to invest in companies that have visible earnings growth, Narain said.

Citigroup has an ``overweight'' recommendation on consumer stocks, telecommunications, information technology and financials, where earnings growth is less volatile, Narain said. It has an ``underweight'' rating on utilities and power and cut its rating on capital goods to ``neutral'' from ``overweight.''

Citigroup on Jan. 7 had set a target for the Sensitive Index at between 23,950 and 25,050 by the end of this year. The bank will review the Sensex target, Narain said.