Sensex, Nifty to see tepid growth in 2017, say foreign brokerages

Deutsche Bank is expecting a likely recovery in Sensex in latter part of the year, UBS Securities has projected an end-2017 Nifty target of 8,800 points


FIIs have sold around $4.9 billion in stocks since October, and their selling accelerated after demonetisation and Donald Trump’s victory in US elections. Photo: Hemant Mishra/Mint
FIIs have sold around $4.9 billion in stocks since October, and their selling accelerated after demonetisation and Donald Trump’s victory in US elections. Photo: Hemant Mishra/Mint

Mumbai: Foreign brokerages are forecasting tepid growth for the markets in 2017, citing uncertainties that cloud the outlook.

Expecting a likely recovery in the latter part of the year, Deutsche Bank set its December target for the Sensex, the benchmark index of BSE, at 29,000 points, on Tuesday.

The Sensex ended trading at 26,899 on Tuesday.

UBS Securities’ India arm has projected an end-2017 Nifty target of 8,800 points. The Nifty ended at 8288.60 on Tuesday.

Citigroup analysts maintained on Monday their September target of 30,000 for the Sensex.

In a note on Monday, HSBC said it was overweight on India in the regional context, and has a Sensex 2017 target of 30,500 points, saying that the key is for Asia’s third-largest economy to continue to push tough structural reforms.

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Much will depend on the Union Budget, which will be unveiled on 1 February.

“Unless the Union Budget surprises positively with a tax-induced fiscal stimulus, the market is likely to mirror the movement seen in the fourth quarter of 2016, with FIIs (foreign institutional investors) continuing to stay on the sidelines while locals provide buying support,” Deutsche Bank said in a statement.

FIIs have sold around $4.9 billion in stocks since October, and their selling accelerated since 8 November, when the government invalidated old high-value currency notes, and Republican Donald Trump won the US presidential elections.

Deutsche Bank analysts said the articulation of Trump’s economic policies will be the most determining global factor, particularly for liquidity from foreign institutional investors, followed by the outcome of the French and German elections, how the UK manages Brexit and the path of the Chinese yuan.

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A stronger dollar has played havoc, and has led to a surge in outflows from emerging market assets to dollar-backed assets.

The dollar index, which is the measure of the greenback against six major currencies, has risen 3.44% since Trump’s win, and is not seen coming down in the near future.

On the domestic front, the verdict of the five state elections in March, the Union Budget, developments regarding the roll-out of the goods and services tax (GST) and other executive actions will affect earnings and sentiments.

UBS expects the implementation of GST, and the recent demonetisation, to remain a drag in 2017—although it says the negative impact of the latter will last only until the end of March.

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Deutsche Bank analysts said GST was a “bitter medicine that needs to be swallowed”.

Still, India is in a good place, HSBC said.

“The fundamentals are strong—India has less exposure to dollar debt than other countries, the balance of payments position is sound, foreign exchange reserves are substantial and, unlike other Asian currencies, the rupee is less reliant on trade with the US,” HSBC analysts said.

They suggested that investors look beyond “concerns about demonetisation, the dollar and bond yields”.

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