I have a Sensex target of 37, 500 by the end of 2018 which is approximately 5 percent up from here. It would mean that the market does not really leave much of an upside and we understand that even with that target of 37,500, we are possibly on the more bullish side compared to many of our peers, said Manishi Raychaudhuri, BNP Paribas.
On the Indian market, Raychaudhuri said, “I am sort of ambivalent about it. India on one hand benefits from relative ease of stock selection, but at the same time, it has not participated in the earnings estimate reversion upwards which the North Asian peers have clearly participated in."
"If you look at last 12-18 months, Asian earnings estimates are up about 15-18 percent and driven largely by Korea, China, and to some extent other North Asian pockets like Taiwan; Indian earnings have continued to drift downwards. We think that this is possibly posing the biggest risk to India right now in conjunction with the fact that the valuation premiums remain stretched on both earnings and price to book terms; they are possibly one standard deviation higher than the long term average,”he said.
“If one looks at the US dollar returns and factors in a depreciation of the rupee, not much, maybe just about 2-3 percent from here, then the returns even to that aggressive target of 37,500 would just be about 2-3 percent. So it means that even taking a relatively optimistic point of view, the Indian market does not leave much of an upside for a secondary market investor at this point of time,”said Raychaudhuri.