We favor ‘value’ stocks in banking, metals & mining, oil & gas and regulated utilities going into CY2017 as we find their valuations inexpensive despite their solid performance in CY2016. We see scope for further re-rating of their multiples on the back of improved fundamentals and lower domestic yields. ‘Growth’ stocks may see further de-rating as their valuations are still rich (despite the recent correction). Also, higher DM yields and high gross margins may act as headwinds.
Useful to know ‘macro’ drivers but useless to invest based on consensus views of outcomes
We see a fair degree of uncertainty emanating from economic and political developments in CY2017. The pace of economic recovery in the US and Europe will be the dominant ‘macro’ variable as it will determine the level of DM bond yields. Recent econo