INDIAN MARKETS, EARNINGS MAY DOUBLE IN 4 YEARS: BANK OF AMERICA

US-based investment house Bank of America Merrill Lynch has said Indian markets and earnings are expected to double in the next 4 years, adding that buying on declines will be a compelling strategy for the Indian equity market.

GDP growth is also expected to revive from its current lows leading to operational leverage for companies as capacity utilisation improves. It, however, added that in the near term, Indian equity market would remain range bound and may correct around 5% over the next two months...

The decisive political mandate for the ruling government BJP leading to an acceleration of the reforms process, faster project clearances and liberalisation of FDI will lead to a revival in the investment cycle.
A reduction in subsidies will also help trim the fiscal deficit, and coupled with a lower inflation rate, could lead to a reduction in interest rates, said the brokerage house. 

BofA-Merrill Lynch sees a sharp reversion in margins in overweight sectors such as auto, cement, industrials and oil and gas as the brokerage house expects that reforms in the oil sector will help reduce subsidies.

Financial stocks will also benefit from the improving profitability of domestic companies.

The brokerage's top picks are ICICI Bank, SBI, Maruti and Oil India. Sectors which have excess capacity and are currently running at low utilization could see rise in margins in case of an economic revival.