Brokerage house Nomura India sees 10 to 11 per cent upside for Indian indices with the BSE Sensex breaching the 21,000-barrier to reach 21,700 by the fiscal year ended March.
Nomura also expects the RBI to cut its repo rate by 50 basis points to 6.75 per cent by December-end and a 25 bps cut in CRR in its June policy review to improve the pace of policy transmission.
In keeping with its view of easing inflation and interest rate scenario, it has maintained an “overweight” stance on banks and real estate. However, Nomura remains “underweight” on capital goods and metals.
According to Prabhat Awasthi, Managing Director and Head of Equities of the brokerage, low economic growth coupled with high inflation and interest rates have dented investor sentiment over the past two years
As inflation eases, more liquidity easing measures, including open market operations and CRR cut, will be employed by the RBI to ensure better transmission of policy rate-cuts by banks, according to Sonal Varma, Chief Economist, Nomura India.
She further expects Wholesale Price Index-linked inflation to remain subdued in 2013-14, while Consumer Price Index-linked inflation is seen moderating to 8 per cent during the year from 10 per cent now. On the growth side, Nomura expects gradual recovery in the economy over the next 12-18 months and has pegged the GDP growth for 2013-14 at 5.6 per cent.