ICICI Securities executive director Anup Bagchi is sticking to the house Sensex target of 21,000 for this fiscal. While he is fundamentally bullish on the domestic consumption story, he tells Samie Modak that negative noises from Europe and inflation, and liquidity concerns back home, could be party poopers.
What do you feel of the GDP numbers for September quarter?
The GDP numbers of 8.9% and revision of the same for Q1FY11 by 1 bps is encouraging and above street expectations. So, it?s reasonable to expect an overall GDP target of 8.75-9% for FY11, which will be as good as China?s. If we witness a pick up in capex cycle in H2FY11 along with some cooling in inflation, GDP growth will be balanced and constructive. The GDP numbers had a soothing effect on the markets where news flows downplayed market fundamentals.
What are the key risks to the Indian markets?
The key risks lie in QE2 not delivering on expected lines along with negative noises from Europe. These would have a meaningful bearing on the asset class returns and flow of liquidity for the markets in the near term. On the domestic front, how fast inflationary and liquidity concerns recede and RBI?s measures would have a bearing on market direction. Additionally, any major unforeseen events like bank bribery scam could inflate volatility.
What is your view on market valuations?
We believe India will continue to command relative premium in terms of investment valuations as long-term growth remains intact as reiterated by the latest GDP numbers. India is a case of a domestic consumption driven story, which will create good structural earnings trend for the companies and also simultaneously call for capex/investment boom compared to some other emerging economies where the growth is skewed towards exports/commodities etc.
Which are the sectors you are bullish/bearish on?
On the sectoral front, we like financials, capital goods/infrastructure/industrials , power , hotels and media and pharma . Also the recent policy reforms in the oil and gas space have turned us bullish on the same. We have been negative on the real estate and commodities space
Where do you see the market from the current levels ?
If it is event driven, it is difficult to predict. If there are no major events, markets should find support at the current levels. I would put the Nifty range between 5,650 and 6,050.
FII inflows have been volatile over the past few weeks. Are they taking money off the table?
After a good year, FIIs are nearing their holiday season. Hence, the market activity is relatively down. The markets have corrected with very little FII activity. Look at the response to large PSU issues – it has been phenomenal. Overall. we must wait for fresh FII allocation starting January.
What is your Sensex target for this fiscal?
It is around 21,000.
Are you revising your target?
No