Foreign brokerages oscillate between good, bad & ugly on India stance in ’12

In August 2012, CLSA Asia-Pacific Markets lowered its 12-month target on Sensex to 18,200 from 19,500 to factor in a corporate earnings downgrade. The brokerage singled out faster slowdown of growth as the key downside risk and said it would remain cautious on the markets till it saw some evidence of investment demand picking up.

Giving CLSA company were Morgan Stanley and UBS. In August, Morgan Stanley cut its year-end target for Sensex by 3 percentage points to 18,850, citing weak earnings growth. In September, UBS cut its year-end target for the BSE Sensex by 9.5% to 19,000 from its earlier projection of 21000.

The brokerage pointed out that FIIs outflows could pose a major risk to the Indian equities: “If we see significant FII outflows, we believe Nifty/Sensex can correct further by 15-20% based on our bear case scenario.”

However, the Sensex ended 2012 with nearly 25% gains closing around 19,500 levels. In fact, FIIs went into an overdrive in the second half of the year, shopping for equities worth more than $16 billion from July till December against net purchases of about $8.5 billion from January to June.

The brokerages were probably taking a cue from rating agency Standard & Poor’s revision of its outlook on India’s long-term rating

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