Sensex may have touched the 33000-mark this year, but global investment bank BofML is not much enthused by this spectacular performance. BofML sees the Sensex falling to 32,000 in December next year. The latest report by BofAML says that the large positive returns from the Sensex are only possible if the current elevated P/E multiple sustain. However, downgrades to estimates are still very much possible in 2018, anticipates the global investment bank. BofAML also expects the general elections scheduled in 2019 to be a trigger for increased social expenditure just ahead of them. It may stretch the fiscal deficit as generally has been the case with the re-election of the incumbent government.
In October earlier this year, Ridham Desai of Morgan Stanley said that investors, in their urge to time the market, may have missed out on the bulk of returns in the stock market. In Morningstar Conference held on 11th October, Ridham Desai had said, “We have computed the number of trading days since 1995, we’ve had 5,500 trading days. In that period, the index is up about 900%. The best 100 days have produced 600% of this 900% return. So, if you missed those 100 days, in your urge to time the market, you’ve missed bulk of the returns which the markets have produced.”
Goldman Sachs and CLSA
Global brokerages Goldman Sachs and CLSA in their reports in October retained their bullishness on the Indian stock markets. Goldman Sachs had then raised Nifty 2018 target to 11,600 vs 10,900 earlier, while CLSA had maintained an overweight position on India.
Global brokerage Macquarie has been expressing caution the Indian market is overvalued, trading at close to 20 times one-year forward earnings, well above its long-term historical valuations of around 15 times. Moreover, it also flagged the downwards revisions to earnings estimates. “There is a clear and present risk to the earnings turnaround in FY19 as consumption, which has been the sole driver of growth, will not likely be strong enough due to weak fiscal push and job growth. The capex cycle remains nascent and limited to pockets of infrastructure,” Macquarie report released in October said.
Indian equities have been rallying since January 2017 even as economic growth had slumped to its weakest since the year 2014 and lower-than-expected corporate earnings in the first quarter of FY 2018.