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Deutsche's Bank Global Markets Group has estimated that its target of the Sensex touching 21000 would go awry only if crude oil prices and the monsoon play spoilsport. “The market correction is actually attracting a lot of investors who missed out last time,” said Mr. Pratik Gupta, MD and Head of Equities, Deutsche Bank group.
“But only a clear visibility in terms of stable policy regime, continuity and progression towards reforms would attract investors,” he added.
An India strategy outlook from their stable said that India valuations at 2.4 x price-to-book and 14 x forward price-to-earnings looked reasonable.
Though India's attractiveness as a destination for capital inflows will continue, heavy fluctuation in oil prices would result in a higher equity risk premium being demanded by investors said the report. And any change in industrial production would surely impact earnings and result in a margin squeeze in Q4 FY11, though top line for India Inc would grow, the report said. A downgrade is possible if monsoon is lower than normal and oil prices hover around $130 to a barrel for a quarter.
The bank is overweight on auto, consumer staples IT metals, oil and gas and telecom and underweight on cement, healthcare, real estate and utilities.
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