BSE Sensex to touch record highs during the current financial year, backed by sustained foreign inflows, expansion in India's trading multiples and a further reduction in interest rates by the central bank, expects Nomura Financial Advisory and Securities.
The foreign financial major has pegged the FY14 BSE Sensex target at 21,700, which is higher than the all-time closing high of 21,005 for the benchmark index hit on November 5, 2010.
STOCK MARKETS LINKS
Prabhat Awasthi, Nomura’s head of equities for India, is of the view that economic growth in the country will see a prolonged bottoming-out, with a gradual pick-up in the second half of financial year. Awasthi also expects inflationary pressures to moderate this year, in line with the central bank’s view.
“Weak demand and lower commodity prices should help lower WPI inflation to close to the RBI’s comfort zone of 5%. CPI inflation remains high, but a smaller increase in the minimum support prices should also lead to a gradual moderation in CPI inflation from above 10% currently to 8% by Q1 2014,” he said.
Awasthi feels that while some sectors will be under pressure due to the slowdown in the economy, sectors such as consumer goods, real estate and banks will gain from easing inflation and falling interest rates.
As per Nomura’s estimates, RBI will cut its signalling repo rate by another 50 bps by December 2013.
The financial advisory firm is underweight on capital goods sector as the capex cycle has not yet picked up. “If (the) infrastructure sector comes to life, it will set the capex cycle rolling. More projects are likely to be sanctioned after the general elections,” said Sonal Varma, executive director and India economist, Nomura.
The Sensex has been on the upmove since April, supported by huge FII inflows and easy global liquidity. However, Nomura expects global liquidity to tighten during the year as the Fed pares down its asset purchase programme