Even after missing 2015 year-end targets on Indian equities, foreign brokerage houses remain bullish on Indian markets. Against expectations of a 15-20% upside predicted for 2015, benchmark indices have yielded negative returns of 9% this year.
German global banking and financial services firm Deutsche Bank expects the Sensex to hit 29,000 points by December 2016, driven by a pick-up in economic and earnings growth.
For the current calendar, Deutsche had forecast the Sensex to touch 33000, expecting fast-paced economic reforms and capital expenditure by the government and corporate houses. However, the Parliament logjam has impacted passage of some crucial reforms such as land acquisition and the GST. In addition, sell-off in emerging markets (EMs) over concerns about China led the German brokerage to trim its Sensex target to 28,000.
“India makes the transformational policy shift from a consumption-oriented bias to investment formation and importantly addressing supply constraints, using the savings generated from lower global commodity prices,” Deutsche had said in a note to investors earlier this year.
US financial services and investment banking firm Morgan Stanley has set its year-end 2016 target for the Sensex at 31,000. Chetan Ahya, MD and Asia-Pacific economist at Morgan Stanley (India), opined that India is one of the few EM economies which has completed its macro adjustment phase and also one of the few Asian economies with very low debt and favourable demographics.
“The recovery (in India) would be led by domestic demand, supported by a pick-up in capital spending (mainly public) and discretionary consumption,” Ahya said in a research note. Morgan Stanley had predicted the Sensex to touch 33000 at the end of the current calendar.
Goldman Sachs and Credit Suisse maintain their bullish stance on Indian equities despite missing 2015 targets.
Goldman Sachs, whose 2015-Nifty target was 9500, continues to expect a good year for the Indian economy in 2016.
“The economy should also reap the benefits of 125 bps in previous rate cuts and the continued weakness in commodity prices,” said Tushar Poddar, chief India economist, Goldman Sachs.
In addition to having a positive stance, foreign brokerages also weigh Indian equities high among EM peers even as India performed worse than China and South Korea.
Swiss-based Credit Suisse has predicted that India will remain an attractive investment destination in 2016 as economic indicators remain strong. “Hard indicators (oil/auto demand) are improving, pointing to an economic pick-up. Next year, the downstream effects of government spending on roads/railways should show up. India macro indicators continue to look good, and it remains among the fastest nominal GDP and earnings growths economies,” Credit Suisse said in a note.
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