Manishi Raychaudhuri, BNP Paribas, said the house has a Sensex target of 37,500 for the year-end 2018.
Talking about the weakness seen in the market, he said typically when the frontline stocks move down 2-5%, the smallcaps and high beta stocks take a lot of hit, which is not surprising.
However, he was surprised, when the market went up from the third week of March.
According to him, "This kind of recovery is happening in the absence of any similar recovery in rest of Asia was a big surprise. The Indian earnings estimates not improving was also a surprise."
However, over the past 9 months, here has been a strong recovery in China and a reasonably strong recovery in Korea over 15-18 months," he said.
“North Asia in terms of fundamentals, in terms of earnings estimate have done a lot better than India. In this context, the recovery and the consequent valuation premium was a surprise," he said.
Besides the higher commodity price concerns for India, it has also to contend with concerns of political nature over next 12 months, said Raychaudhri.
However, there are some advantages India has in terms of stock selection. There are many stocks in top 50 to top 100, which are good in terms of corporate governance, reasonable growth and so the foreign institutional investors are still overweight India but the extent of that overweight has declined, he said.
According to him, one of the main reasons for weakness in the pharmaceutical space is competition plus increased vigilance from food and drug administrations.
The house is upbeat on consumer discretionary space across Asia and India, he said.