Goldman Sachs upgraded India to overweight and placed a 12-month target of 12,500 for the Nifty that translates into an upside of a little over 9 percent from March 18 closing level, CNBC-TV18 reported.
Benchmark indices have climbed above crucial resistance levels in March. The S&P BSE Sensex has reclaimed 38,000 whereas the Nifty has flirted with 11,500. Benchmark indices have hit a 6-month high.
The global investment bank is of the view that the rally that we are witnessing is a catch up pre-election rally driven by foreign institutional flows (FIIs).
FIIs have poured in nearly Rs 21,000 crore in Indian markets so far in March as compared to Domestic Institutional Investors (DIIs) who were net sellers to the tune of Rs 10,247 crore.
Goldman Sachs expects earnings to grow 16 percent this year, highest in the region.
Factors that contributed to the upgrade for Indian markets was sharp underperformance, better Q3 earnings, and pick-up in FII flows.
Another global investment bank, BofA-ML seconds Goldman Sachs opinion that market might be playing catch-up in the run-up to elections. “Improving market expectations of a BJP victory in the upcoming elections is leading to a rally. 29 Nifty stocks have outperformed this rally,” said the note.
“While prices mean revert, MSCI India's P/E premium to EM is well above averages. The Nifty fair value is 11,300 by December 2019 that implies 1.2 percent downside from current levels,” added the note.
Commenting on the broader market, BofA-ML is of the view midcaps should continue to de-rate in the near term. And, rotation within the large-cap financials is likely to continue in the short term.
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