Deutsche Bank expects the benchmark Sensex to end the calendar year at 21,000, a rise of over 15 per cent from the current levels. According to the global finance major, rising crude oil prices remain the biggest concern in short term even as lower valuations could lead to revival in the quantum of foreign inflows.
“Crude is the biggest risk for the Indian market or else we would have been bullish even in the short-term,” said Pratik Gupta, managing director, head – equities, Deutsche Equities India, while addressing the media during the three-day investor conference.
Gupta, however, added based on his interactions with some global entities at the investor meet, that it cannot be said foreign institutional investors (FIIs) are not looking at the Indian market.
“People are still coming and evaluating. One must remember (foreign) flows are not valuation insensitive. There are a lot of people who missed the rally earlier,” said Gupta.
Incidentally, while 2010 saw FIIs pouring in nearly $30 billion in Indian equities, the current calendar year has seen an outflow of over $1.7 billion, according to the data available with market regulator.
Meanwhile, the foreign brokerage major is advising its clients to stay away from “rate sensitive” sectors even though valuations look “reasonable”.
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“While we remain convinced about the long-term India investment story, the market is set to face a gale of headwinds in the short term,” said the Deutsche Bank India strategy report released in January. For long-term investors, a downdraft in the short term will be an excellent opportunity to pick value, it added.
The report adds that the second half of 2011 could see India’s structural strengths (strong growth environment, resilient domestic consumption) re-assert themselves and the Sensex is likely to rebound to 21,000. Deutsche’s last year Sensex forecast was 22,000.
On the recent political crisis and unfolding of corruption related issues, Deutsche Bank is of the view that much of it is already priced in the current valuations.
“As far as the political environment is concerned, investors are used to coalition (politics) for long. They want continuity of policies,” said Gupta, adding that monsoon could be the next thing to watch out for.