Optimistic on mkt, see Sensex at 21000 for 2013: Deutsche

Despite volatility in the market post the credit policy, Abhay Laijawala, MD and Hd-Research, Deutsche Equities remains optimistic on the Indian market and gives the Sensex target of 21,000 for 2013.

In an interview to CNBC-TV18 Laijawala says market will see lot of volatility but as far as India is concerned, investors should focus primarily on export and rural recovery plays.

Also Read: Mkt volatility to rise; enter with 2-3 yr frame: BlackRidge
Meanwhile, Laijawala believes the worst of currency crisis is behind us. Below is the verbatim transcript of Abhay Laijawala’s interview on CNBC-TV18 Q: The month of September has been very well behaved for our markets moving all the way upto 5,900, how do you see October pan out?
A: We have seen the markets get relief of sorts from the stabilisation of the currency and then there has been some volatility following the announcement of the credit policy but we remain constructive on the market. We have a Sensex target of 21,000 for the current year.
Markets will continue to look for the ebb and flow of global as well as domestic macro newsflow and take direction from there. So, we will see a lot of volatility in the markets but as far as India is concerned, there are two key themes that investors should be looking out for and these are the export/global recovery plays and the rural recovery plays. Q: Would you stop worrying about the rupee for now?
A: That is the kind of question that we are being asked from all the investors. We certainly believe that the worst of the foreign currency related issues as far as India is concerned may probably be behind us and this stems from two key factors.
One is the announcement on the FCNR(B) swaps, which we believe has the potential to raise anywhere between USD 15 and 20 billion in terms of foreign exchange related earnings.
We also believe that with expectations of increasing exports and two months of good export numbers, there is an expectation that the current account deficit (CAD) is indeed going to be between USD 60 billion and USD 70 billion. So, the currency was getting impacted by both.
The actual CAD as well as the financing of the CAD and with these variables, at least in the near-term we believe that the risks maybe ebbing.

Q: How do you approach this market from now until the end of the year, even if you are constructive, do you think this continues to be a traders’ market and it will be difficult for investors to make money because in the last four weeks, it has been pretty much of a stealth rally, a move with no large scale participation and largely trading oriented profits?
A: Investors must start focusing on themes. So, any sector that is highly exposed to either the global macro situation or the domestic macro situation will see considerable volatility but those sectors where you see a relatively lower risk or a relatively lower sensitivity to global or domestic macro may probably do far better.
For example, we are seeing one of the finest monsoons in almost 10-15 years. In a week or so, we will have all the final data as of the latest data.
We see this year’s monsoon has been about 4-5 percent above normal, you had very good rainfall distributed across the month, sowing is high and therefore, we could see some significant surprises emerging from those companies that have invested in rural distribution. This is because the multiplier impact of rural prosperity in this year’s monsoon could be significantly ahead of a similar multiplier seen in some of the previous best monsoon years.
Over the last four-five years, we have seen a considerable expansion of distribution reach by India Inc into rural India and also in terms of global recovery plays, let us not forget the fact that over three ports of country PMIs are showing a considerable recovery.
With very strong growth in the developed world particularly the United States and the surprises coming in from Europe, there is a very strong possibility that the combination of currency depreciation and strong global growth could keep exports at an elevated level. So clearly the two themes investors must focus on are global recovery plays and rural recoveries.