Sensex set to touch 28,000 and rupee will stabilise at 57-58 to the dollar by year-end
India is at the beginning of a strong bull market over the next few years following a strong mandate for a Narendra Modi-led government, top brokers and fund managers told ET. Many brokerages revised their Sensex and Nifty targets within hours of the election results on Friday. The Sensex is set to touch 28,000 and the rupee will stabilise at 57-58 to the dollar by the end of the year, according to a survey of 26 fund managers and brokers by ET. Some see the Sensex surging by about 10,000 points more in two years. India voted for development and reforms, and the new government will push through policy changes to revive growth, which in turn will trigger a strong bull rally in Indian equities, said experts. “The decisive mandate by the people of India will pave the way for a conducive policy environment, leading to the resurrection of growth in the economy over the next few years,” said Sandeep Nayak, chief executive officer, Centrum Broking. “FII and FDI investments should accelerate, setting the stage for a robust bull run for the next couple of years.”
About 50% of the survey’s participants expect the Sensex to touch 28,000 by December while 15% feel the benchmark will hit 30,000.
“Erring on the side of caution, even if we assume the Sensex generates 25% per annum over each of the next two years, we are looking at Sensex at 30,000 a year from now and at 37,500 two years hence,” said Saurabh Mukherjea, CEO, institutional equities, Ambit Capital.
About 27% of the poll’s participants expect the rupee to strengthen to 57-58 against the dollar whereas 18% expect it at 56-57.
“The incoming government may prefer a stronger rupee and RBI too may decide to stop the forex market intervention now that political risks have subsided,” said Nilesh Jasani, analyst at Jefferies India.
Most experts advised buying stocks of quality infrastructure companies, but some preferred PSU banks
While 58% advised buying quality infrastructure stocks, 50% preferred state-owned banks. Energy, capital goods and metals are the other sectors strongly recommended by the poll participants, who advised an exit from FMCG, IT, pharmaceutical and realty. “Defensive sectors such as pharma, IT and FMCG may take a back seat while the balance would shift towards sectors linked to domestic investment and infrastructure,” said Anup Bagchi, managing director and CEO, ICICI Securities. “Investors should continue with a staggered buying approach, and any near-term correction may be used as a buying opportunity in high-beta, capital-intensive companies with a robust balance sheet.” The top picks of a majority of the brokers and fund managers include Axis Bank, ICICI Bank, L&T, LIC Housing, M&M, Maruti, ONGC, RIL, SBI and Tata Motors. Many of the participants said that consumer price inflation, a big worry for the central bank, would be at 7.5-8% in FY15. Annual consumer price inflation accelerated to a three-month high of 8.59% in April, driven by higher food prices, government data showed on Monday. As for growth, 47% of those polled expect India to expand 5.5-6% in the current fiscal, in line with expectations despite the change of guard at the Centre as the challenges to the economy remain, analysts said. They said revival will be gradual rather than sharp. “The revival in economy will be investment-led, but gradual. The pick-up in growth will be a function of pace of policy debottlenecking, investment appetite of the corporate sector and extent of the government’s own role in capital formation,” said Rohini Malkani, chief economist, Citigroup India, in a note to clients.