Deutsche, Morgan Stanley, Citi up sensex target

At least three major brokerages revised their Sensex targets on Monday on the back of a slew of reform measures from the government.

Deutsche, Morgan Stanley and Citigroup now expect markets to head from 8% to over 24% higher from current levels.

Abhay Laijawala and Abhishek Saraf of Deutsche Bank highlighted the favourable timing of the government announcements.

“The timing of announcements has propitiously combined with the positive announcements from Europe and US central bankers, and will ensure that India does not miss out on the ongoing global risk rally. We are raising our December 2012 Sensex target to 20000, implying a return of 8% from current levels,” they said in a note.

Aditya Narain and Jitender Tokas of Citigroup revised their Sensex target from 18400 by December 2012 to 19900 by June 2013.

“We expect the market to perk up immediately (+2-3%) on sheer and primarily foreign flows: a mix of fairly real policy change, global liquidity (QE3), and yes – fairly substantial outperformance.

While India is not particularly well positioned for relative performance on QE3 (because of high crude/commodity prices) – these reforms should drive early gains,” said the report.

Morgan Stanley has also revised its Sensex target to 23069, according to a Reuters report.

The government reduced fuel subsidies and opened up foreign direct investment in retail, aviation, broadcast and power exchanges at the end of last week with the FDI annnouncements coming in after market hours on Friday.

The market reaction was muted on Monday, with the BSE Sensex going up only 78.04 points or 0.42% to close at 18542.31. The National Stock Exchange’s Nifty closed at 5610.

Experts suggested that this could be a result of portfolio reshuffling in addition to disappointment over the Reserve Bank of India not cutting rates in its policy meeting on Monday.

It did, however, cut the Cash Reserve Ratio(CRR), or the portion of deposits that banks have to park with it, by 0.25% to 4.5%.

“There has also been some selling in defensive counters. IT and pharma stocks have taken a beating on the back of the appreciation in the rupee,” said Chokkalingam G, executive director and chief investment officer at FCH Centrum Wealth Managers.

The rupee was up 0.55% to close at Rs54.01, a stronger rupee negatively impacts earnings for export-oriented entities.
“There is a change in the portfolio stance. Defensive sectors such as Information Technology (IT) and fast moving consumer goods (FMCG) were down as they saw some selling,” pointed out Aneesh Srivastava, Chief Investment Officer at IDBI Federal Life Insurance.

Sectoral indices for IT and FMCG were the worst performers on Monday. They were down 3.18% and 3.66%, respectively.
Foreign institutional investors were net buyers by Rs2,252.17 crore on Monday, according to provisional exchange figures.