Global financial services major HSBC has maintained its year-end benchmark Sensex target at 29,000 even as uncertainty prevailing in the equity markets owing to Donald Trump winning the US presidential race and Indian government scrapping the Rs 500 and Rs 1,000 currency notes.
HSBC, which has also not changed its 32,400 Sensex target for December-end 2017, noted that the two major events last week may have short-term impact as the country’s fundamentals remained strong.
“If there is any volatility, we believe India will get caught in it but relatively less so than other Asian markets due to lower sensitivity to factors such as bond yields, currency and Chinese growth,” HSBC said in a note today.
“In addition, domestic and global liquidity should support lower bond yields and hence a lower cost of equity. We also believe that Indian valuations,” it added.
The report noted that while the recent demonetisation by the government to crackdown on black money is a positive move for long term growth, it will be disruptive in the short term given India is largely a cash driven economy.
“India has undertaken a similar exercise before, in 1978. During that time there was a dip in money supply, GDP growth, inflation, and consumer expenditure but it was a short-term phenomenon,” it added.
On Trump win, HSBC noted that Indian markets would be relatively insulated from the event and may get impacted more through currency fluctuations, impact on China’s growth as well as changes in oil prices, among others.
Among other sectors, HSBC is overweight on consumer staples, energy and financials.