Deutsche Bank cuts Indian stocks to 'neutral' relative to other emerging mkts

Fri May 23, 2014 9:02am IST

A broker monitors share prices while trading at a brokerage firm in Mumbai May 13, 2014. REUTERS/Danish Siddiqui

A broker monitors share prices while trading at a brokerage firm in Mumbai May 13, 2014.

Credit: Reuters/Danish Siddiqui

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Reuters Market Eye - Deutsche Bank downgrades Indian stocks to "neutral" from "neutral/overweight" relative to other global emerging markets, saying valuations, after a sharp rally on Bharatiya Janata Party's (BJP) decisive election win, appear "very stretched" against lower GDP growth.

The Nifty has risen 24.4 percent since Sept. 13 when Narendra Modi was declared as BJP's prime ministerial candidate, with overseas funds pumping over $14 billion in the cash shares over that period.

"We acknowledge that there is the potential for massive long-term upside, but we suspect that there needs to be further economic pain before the agenda for more fundamental reform to governance practices becomes clearer," Deutsche said in a report on Thursday.

Deutsche says Mexico and China have also witnessed similar selloff in the past as reform euphoria in both markets waned, while Modi's comparison with Margaret Thatcher raises short to medium term risks.

The investment bank says it still prefers India to the other BRICs, but advises non-emerging market investors to wait for a better buying opportunity.

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