Deutsche Bank cuts Indian stocks to 'neutral' relative to other emerging mkts
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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The Nifty will stay in a broad band of 7,800-8,200 with an immediate resistance at around 8,050 levels. One should look to selectively accumulate in sectors such as infrastructure, capital goods, cement, power and metals. The outperforming sectors such as pharma, IT and auto ancillaries could take a breather due to international headwinds, writes Ambareesh Baliga. Full Article
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