India is back on the radar with foreign brokerages like Deutsche Bank, Morgan Stanley, BNP Paribas and JP Morgan upgrading their India rating. Falling crude prices, beaten down valuations and the promise of policy action have forced global investors to revisit the Indian markets, report CNBC-TV18’s Nimesh Shah and Animesh Das.
The last fortnight, has seen slew of upgrades of the Indian markets by some of the influential foreign brokerages.
Most brokerages feel, falling crude prices, possible policy action with the prime minister taking charge of the finance ministry and beaten down prices make valuations attractive.
Morgan Stanley’s Asia strategist – Jonathan Garner in his note to clients today said, “India is now close to trough valuations and we are upgrading to equal weight from under weight.”
Morgan Stanley sees the rupee at 52 to a US dollar at the end of the year and has aSensex target price of 19,954.
“We put it on an equi-weight but, we expect between 20-40% returns from these valuation levels six months down. A Sensex target of 20,000 is certainly achievable, if not slightly higher. Emerging markets are exceptionally cheap to their historic valuations and discounting in our view, some form of recession. Obviously the European situation could generate an outcome like that”, says Garner.
Deutsche Bank in it’s India strategy note said they expect tactical rally in near term. It says oil off the boil, attractive valuations and sharply depreciated rupee are strong tailwinds.
Even JP Morgan says, Indian equities would be worth re-visiting in July as expectations are running low and valuations are at reasonable levels.
Both believe the possibility of policy action post the presidential election could provide the necessary triggers for a rally.
Global investors are also warming up to the message being sent by the prime minister that India is open for business and welcomes foreign investment. With an assurance of clarifying tax ambiguity on account of the retrospective amendment and GAAR, investors have increased fresh allocation into India in the last few days.
Arvind Sanger, managing partner at Geosphere Capital Management says, “If the political stars are realigned in terms of a coalition and that allows the government a bit more of a freedom to do something then that’s what’s getting us optimistic. The combination of rupee having weakened so much, the finance ministry having changed and the coalition having maybe realigned if not officially but unofficially then those create room and space for the government to do something.”
The government will now have to walk the talk and deliver on the promise of unleashing the animal spirits of the economy.
(curtsey : money control)
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