Reuters Market Eye - Earnings and quality balance sheets will become increasingly key factors for Indian stock markets, Deutsche Bank says in a report titled "Show me the earnings."
"We expect companies and sectors - particularly with a shrinking investible universe - seen displaying sustainable earnings momentum will see valuations continue to expand, in many cases, beyond recent historical highs," Deutsche writes in the note dated on Friday.
Deutsche argues India has seen the "shallowest" downward revision to consensus earnings among BRIC countries.
Within individual sectors, private banks and consumer goods have seen consistently positive earnings revisions, while public sector banks, telecoms, metals and oil & gas have seen downward revisions.
Deutsche recommends investors to stay "overweight" in private sector banks and non-banking financial companies, and select consumer discretionary and staple stocks, as well as select IT stocks.
Its top picks are Axis Bank , Tata Consultancy Services , Larsen & Toubro , Cummins , Mahindra & Mahindra , Bajaj Auto , and ITC.