German brokerage Deutsche Bank has trimmed its year-end Sensex target to 31,000 from 33,000 on account of a more muted environment for foreign inflows and earnings cuts in preceding two quarters.
According to the brokerage, the second half of 2015 is likely to be marked by a “tug of war between global headwinds and domestic tailwinds.”
“While US Fed lift-off concerns and global bond volatility should lead to a more muted and uncertain environment for foreign inflows, the domestic macro environment appears to be on an improving trajectory,” Deutsche Bank said in a report.
As per the brokerage, while India would not stay immune to global volatility in second half of the year, the country may outperform most of its emerging market peers “based on an improving domestic macro-economy, return of government spending and the end of earnings downgrades.”
“While we continue to maintain our constructive outlook on Indian equities, we trim our December, 2015 Sensex target to 31,000 from 33,000 premised on a more muted environment for foreign inflows and earnings cuts in preceding two quarters,” Deutsche Bank said.
Government spending has picked up impressively in April this year, and if the spending momentum continues at the current pace, it would have a “strong and visible impact on macro-economic data,” the report said.
The government’s plan capital expenditure in April rose by 105 per cent to Rs 110 billion while its total plan expenditure (capital and revenue) in the month was up 53 per cent, year-on year, it noted.
Recently, many foreign brokerages have slashed their Sensex and Nifty targets.
While Citi cut its Sensex forecast to 32,200 by December from its earlier projection of 33,000, the British brokerage HSBC trimmed it to 26,900 from 30,100.
On the other hand, the Swiss investment bank UBS reduced its Nifty target to 8,600 by December from 9,200.
However, global financial services major Morgan Stanley has reiterated its Sensex projection of 32,500 for December, 2015.