But risk-reward unfavourable.
The recent surge in equities has led to foreign brokerages reverse their negative stance on Indian equities significantly.
Goldman Sachs has become the third brokerage after Deutsche Bank and Nomura to revise its target on Indian equities in the last two weeks.
Goldman Sachs on Tuesday raised its outlook from underweight to neutral and increased its earlier one-year forward Nifty target from 5,700 to 6,900.
“Following a detailed set of meetings in Delhi and Mumbai, we believe it is appropriate to
raise our investment stance, recognising the equity market has recently risen significantly,” wrote
Timothy Moe and Sunil Koul, strategists at Goldman Sachs in a report.
The foreign brokerage firm, which till one and half months back, was cautious on India due to downside risks to economy and earnings, now attributes politics, macro and micro improvements for the change in stance.
Goldman believes that while optimism over political change, led by BJP’s prime ministerial candidate, Narendra Modi, is dominating economic concerns, there have been some positives on the macro front as well.
“External capital account pressures have moderated, at least for now. There are early signs of cyclical pick up and structural improvement. The earnings outlook is stabilising and we have raised our calendar year 2014 earnings per share growth forecast from 8% to 11%,” wrote the analysts at Goldman Sachs.
Similarly Nomura too has restored its March-end 2014 Sensex target of 22,000 after having cut it to 20,000 some months back. This follows Deutsche Bank’s move to raise Sensex target from December 2013 end target from 21,000 to 22,000 after having reduced the target from 22,500 to 21,000 in July.
Prabhat Awasthi, Nipun Prem and Sanjay Kadam, analysts at Nomura Financial Advisory services believe that the delay in the Fed’s stimulus tapering plans, significant positive surprises in trade data and possibility of positive surprises on the political front have reignited the bullish sentiment.
The brokerages, however, believe that economic woes are far from over and therefore are still cautious on domestic cyclical plays. Also they see risk-reward getting lower at these levels.
Piyush Garg, CIO at ICICI Securities believes that its not easy to predict markets but at this juncture, there are more downside risks than upside and one needs to be cautious.
“Markets seem to be pricing in a lot of positive expectations- be it related to Modi becoming next PM, improvement in current account deficit or on RBI moves. I think there are lot of risks and the Fed tapering concerns may make a comeback with a venegance earlier than expected. Though the current account deficit has been contained, it has been on account of restrictions on gold imports and not because of fundamentals. Also the fiscal deficit still remains a concern,” he said.
Foreign investors have been aggressive buyers of equities recently. In the last 23 straight shares, they have bought shares worth Rs 18,500 crore.
“We note that potential upside from the current market level is not large (nearly 4%) and think that risk-reward in the overall market is now at best neutral,” wrote the trio at Nomura.
Goldman too says that although they are more constructive, India continues to face challenges.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}