For most analysts and stock market investors, the valuation of equities market seems stretched after the recent surge in stock prices, which lifted the BSE among the top-10 global markets.

Biggies remain bullish The S&P BSE Sensex and the NSE Nifty gained about 35 per cent this year so far. However, foreign institutional investors and investment advisory majors such as Citigroup, Morgan Stanley, CLSA and UBS do not seem so.

So far in 2014, FIIs have pumped in almost $16 billion. Most of them expect at least a 15 per cent rise in benchmark indices.

Citigroup on Monday raised the December 2015 Sensex target to 33,000 and that of Nifty to 9,850.

According to the global financial services firm, a seamless transition, falling rates to a rising economy/earnings could fire the market more. More likely, a post-rate and pre-economic deliverance stall.

Rate cuts to fuel stocks Citigroup said stock markets generally see the best gains during the time leading to rate cuts and during the early stage of policy rate cuts. Since the rate engine is expected to “fire” now and in early 2015, the market sentiments look bullish.

According to Morgan Stanley, which sees S&P BSE’s Sensex at 32,500 by next year-end, the bull run in equities is set to continue in 2015 on governmental reforms and benign global environment which will boost the country’s growth potential.

“Our view is the government’s reforms are on track — administrative reforms to make India a better place to do business, tax reforms to kick start growth, fiscal consolidation to stem inflation, realignment of subsidies to make the economy more productive and a big boost to infra spend to lift growth. If these reforms progress well, we see upside risk to earnings estimates,” it said.

‘India, by far the best’ The chief strategist for CLSA Asia-Pacific Markets Christopher Wood, whose weekly Greed & Fear column is widely followed, in an interview with Barrons.com, said: “India is by far the best story in Asian emerging stock markets and globally.

“The great thing about India: It’s got nothing to do with funny money; it’s got nothing to do with China. In my long-only Asian portfolio, I have more than 40 per cent in India. Frankly, I could easily have the whole of my Asian portfolio in India.”

Global money has only just started to come back. This is the best story in Asia, and it’s the most simple story, he said in the interview and added: “Emerging-market investors are already overweight; they’d be idiots if they weren’t overweight. But in my view, they should be at least three times overweight.”

‘36,000 by March 2016’ Domestic financial institution Ambit Capital expects the S&P BSE Sensex to touch 36,000 by March 2016. “It will be a slow cyclical recovery. The Indian economy will chug along assisted by industrial recovery that will boost earnings growth,” Saurabh Mukherjea, CEO — Institutional Equities, Ambit Capital, told BusinessLine .

“This (2014-15) will be the first year of three-to-four year recovery wave. The first three years of a 10-year economic cycle is generally lucrative for the stock markets,” Mukherjea said.

UBS, which maintains 2015 year-end target of 9,600 for Nifty, is overweight on banks, oil and gas, power and underweight on IT services and consumer staples.

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