Mumbai: Leading foreign brokerage Deutsche Equities India today joined counterparts in giving an "overweight" call on Indian markets and said BSE benchmark Sensex is poised to touch 22,500 points by 2013-end.
Deutsche Equities India said the recent government actions have completely changed their views on Asia's third largest economy and this is reflected in the bullish target. The 30-share BSE benchmark may rise to 22,500 points by December, led by financial, energy, industrial, material and information technology stocks, said Abhay Laijawala and Abhishek Saraf, strategists at the brokerage arm of Germany's Deutsche Bank, while releasing a report here.
Deutsche Equities is the latest to join the 'buy-India' league of brokerages, saying 22,500 is the base case scenario if oil remains in the $11-115 per barrel range and the government cuts current account deficit urgently.
The officials said the brokerage may come up with a revised target in view of the government's decision today to allow "small" hikes in diesel prices over a period of time. Global biggies like Morgan Stanley, Goldman Sachs, JP Morgan, Nomura, Citigroup and Macquarie have already raised the Sensex target for 2013 to a high of 23,069 by December.
They have said that the fresh wave of economic reforms set off by the government last September will revive investment and boost economic growth, which is set for a decadal low of 5.5 percent in FY'13.
Yesterday, Australian brokerage Macquarie raised the Sensex target to 22,200 by December, while Goldman Sachs last week said it sees the 50-issue Nifty climbing 17 percent to 6,900 by 2013-end. "The onus of transition from vicious to virtuous will initially lie with New Delhi and the Reserve Bank during the first half of 2013 before the baton is taken up by the private sector in the second half of the year," said Laijawala, while releasing the report titled `Namaste India'.
Maintaining that "it is all about government policy certainty," he said, "we are setting our year-end Sensex target at 22,500, implying a 14 per cent return from current levels and continuing with the positive momentum witnessed since last September."At our target, the Sensex would trade at FY14 PE multiple of 15.9 times, which is in line with the average multiple at which the market has traded over past five years," Laijawala said.
Policy action from the government to reverse the nearly 20 months of vicious cycle of slowing growth, high inflation and stalled capex will form the centre stage of market catalysts along with improving risk appetite and a positive environment for equities globally, he added.
In 2012, the Sensex rallied 26 percent and the Nifty soared 27 percent, the best return since 2010. Amongst the latest flurry of upgrades, Morgan Stanley's target of 23,069 for the Sensex is the best of all, while the CLSA has given a level of 21,250 for December.
In morning trade on January 15, the Sensex climbed to over 20,000 for the first time since January 2011, but settled a tad low for the day. Today the benchmark index rallied 146 points to close at 19,964 points after the government virtually deregulated the diesel prices.
Overseas funds bought $ 24.5 billion worth of shares in 2012, the most among 10 Asian markets. The highest foreign inflow was $29 billion in 2010. Deutsche Equities said it is bullish on cyclical stocks, a departure from its last two years of focus on defensives.
Consumer staple, health-care and utility stocks would remain 'underweight', the brokerage said.