Global investment bank Julius Baer has upgraded Indian share markets to ‘overweight’, with the worst of the coronavirus pandemic seemingly more than, the vaccine drive getting expanded, and financial recovery taking shape. In a current report, Mark Matthews, Head of Research Asia, Julius Baer mentioned that India could develop into the quickest-expanding important economy in 2021, forecasting India’s GDP to develop 9% on-year in 2021. “We change our stance on India from market-weight to overweight and see 15% upside from current levels with a Sensex price target of 58,450,” he added.
India’s efforts to limit the spread of the coronavirus right after the initial peak final year has been lauded by the investment bank, terming them far better than international peers. The report mentioned that for India the worst of India’s Covid epidemic seems more than, with some herd immunity in all probability obtaining been accomplished.
Themes to play on Dalal Street
Talking stock markets, the report mentioned that the economic sector now appears to be on the mend. The biggest sector in the Indian stock market place is the financials sector, at 34% of the Bombay Stock Exchange, exactly where shares have been weighed down by NPAs – a predicament we see enhancing in light of the formation of a ‘Bad Bank’,” Matthews mentioned. Additionally, the IT sector is also anticipated to develop strongly with the fast digitalization of the international economy.
To advantage from the up-move anticipated in the market place, Julius Baer recommends a barbell strategy of owning, constant development-compounding sectors with structural stories, which includes IT, healthcare and FMCG, with a concentrate on the major corporations in them. Along with that, the report recommends owning Cyclical sectors like financials, infrastructure, housing and discretionary consumption, whose earnings are more correlated to the financial recovery.
Strong financial development to cheer stock markets
Julius Baer mentioned that India’s fiscal stimulus package offered relief straight to the poor and compact organizations. “Cognizant of the potential for very robust fiscal stimulus provoking a sovereign rating downgrade, government relief was constrained largely to providing support for the weakest sections of society, and small businesses,” they mentioned. The Reserve Bank of India’s function has also been praised as the central bank pruned prices and injected liquidity.
“An economic recovery is underway, and we look for 9% on-year GDP growth this year, followed by 7% next year. We look for earnings per share to grow on average over 25% over the next 3 years. It would be unprecedented for the stock market to fall in an environment of such strong growth,” the report mentioned.
Advising investors to watch out for achievable dangers, Mark Matthews mentioned that FII flows have been robust for India equities and earnings recovery forecasts will need to sustain to justify existing market place levels. Along with this, a resurgence in coronavirus situations and resulting in lockdown restrictions or delays in the vaccination drive, are also observed as possible dangers for India’s development.