BackUBS cuts end-2015 Nifty target to 8,600
UBS cites lower-than-expected corporate earnings growth and expected impact from potential weak monsoons ahead for the cut
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Mumbai: UBS cut its end-2015 Nifty target to 8,600 points from 9,200 earlier, citing lower-than-expected corporate earnings growth and said investors were worried about the adverse impact on growth and inflation from potential weak monsoons ahead.
The Swiss financial services company’s Indian equities arm UBS Securities India Pvt. Ltd said that 2015 is forecast to be an El Niño year—with 70-90% possibility, and the Indian Meteorological Dept (IMD) is predicting a monsoon deficiency of 12% below long period average.
On Wednesday, the 50-share Nifty closed 1.27% or 102.05 points higher at 8,124.45 points, but is still down 1.91% for the year-to-date.
“While markets have corrected, reflecting some reset of growth trajectory expectations, we believe market expectations in terms of pace of growth recovery need a further reset downwards, leading to continued near-term consolidation," UBS analysts Gautam Chhaochharia and Sanjena Dadawala said in a note on 9 June.
UBS analysts believe the government decision on minimum support prices, which is usually announced in June is a critical event ahead, and any change in political economy reflected in this could be a near-term risk to the brokerage’s thesis of disinflation and consequently lower interest rates.
“We reiterate our long-held view of a gradual recovery, with a real GDP growth forecast of 7.5% in FY16 (from 7.3% in FY15) and acceleration only in FY17 (to 8.3%)," UBS analysts said adding that Nifty earnings growth for FY15 at 2% was lower than expectations.
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