Macquarie raised its target for Nifty index to 5,000 from 4,600 points, citing the foreign investor flows coming from the rising global liquidity, but said it still remains cautious due to the uncertain economic outlook among other factors.
"We believe risks remain on the downside and see no compelling reason to turn positive; we think it is now a stock picker's market," Macquarie analysts said in a report dated March 30.
Macquarie has a rating of "underweight" on Indian stocks.
Though foreign institutional investor inflows have reached $9 billion, key uncertainties remain, including the extent of interest rate cuts, government reforms and slower economic growth, Macquarie said.
The brokerage said it expects current P/E ratios of 13 times to move towards 14.5 times as earnings estimates are downgraded, a level that it called neither expensive nor cheap.
Macquarie said it favoured global recovery sectors such as technology, pharmaceuticals and energy, while also upgrading telecoms to "overweight".
It said it would retain its "big underweight" on the financial and capital good sectors.
