Raise December 2014 Sensex target to 28,000: Abhay Laijawala

Abhay Laijawala, managing director and head of research, Deutsche Equities India

The historic verdict hence justifies a rerating of the Indian equity markets. We are raising our December 2014 Sensex target to 28,000 (implying a multiple of 18x on FY15 EPS) and strongly believe that we are at the cusp of a structural bull market. The Indian market tends to give a new government the benefit of hope and hence we strongly believe that the market is unlikely to consolidate meaningfully until the budget.

While the budget will now emerge as the next key milestone for the market, investors should begin to assess what the next government is likely to do.  

We expect: (1) rather than big bang isolated reform announcements we are likely to see an articulation of a credible roadmap towards restoring India's long term GDP growth trajectory and a manufacturing turnaround (2) dismantling archaic regulations of land, labour & commodity markets which have retarded economic growth so far (3) an aggressive focus on empowering the states through a new centre-state coordinating committee; if successfully executed this can not only accelerate clearances and approval processes but the way India works (4) a strong thrust on FDI with defence being an area of high focus (5) increase in government plan expenditure together with bold moves on subsidy rationalization. With a national consensus already built on diesel reform, we expect a faster move towards diesel deregulation. (6) an integrated energy policy to raise India's energy security through higher domestic production. (7) Dilution of government ownership in PSU banks to 51%.