Foreign investment advisors have turned bullish after a clear mandate emerged for the Bharatiya Janata Party-led National Democratic Alliance in the 2014 Lok Sabha elections.

Year-end target 8,000 UBS has set a target of 8,000 for the NSE Nifty for the calendar year.

“Based on our top-down expectation of 15 per cent earnings growth in 2015-16, and 15 times price to earnings multiple, we set our Nifty target for end-2014 at 8,000,” said UBS analysts Gautam Chhaochharia and Sanjena Dadawala.

However, the brokerage said there could be further upside to this target depending on how policymaking evolves over the next few months, which could push up earnings estimates and multiples. According to HSBC Global Research, although India is one of the most loved markets and the market trades at a 35 per cent premium to the MSCI AXJ Index, it is still quite heavily positioned towards defensive sectors (IT, healthcare and staples).

This could see strong rotational shifts towards domestic sectors such as energy, materials, infrastructure and utilities.

Protracted recovery It, however, added that “the strong mandate will allow the new Government to move forward with reforms, although we think change will take time and the economic recovery is likely to be protracted.”

Deutsche Bank Markets Research said: “With the economy and the investment cycle as the focus of the new Government, equity markets are likely to react to the verdict with euphoria. Over the past decade, a fragmented coalition with differing economic ideologies had been the key reason for the economic malaise. The historic verdict hence justifies a re-rating of the Indian equity markets.

“We are raising our December 2014 Sensex target to 28,000 (implying a multiple of 18x on FY15 EPS) and strongly believe that we are at the cusp of a structural bull market. The Indian market tends to give a new Government the benefit of hope and hence we strongly believe that the market is unlikely to consolidate meaningfully until the Budget,” it added. Macquarie Research said Indian markets are up 17 per cent year-to-date, but are still at 15 multiples price-to-earnings ratio, which is the 17-year average.

“We draw an analogy with the Japanese market which moved up 80 per cent in six months in anticipation of reforms. In this regard, Modinomics is matching the Abenomics euphoria,” it said.

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