The Citigroup expects the Sensex to rise 13 per cent to 18,200 in the next six months.
“Though the valuations are low, they are relatively higher in the global markets and we see that the fundamentals of the country are not as bad as they are projected to be,” Mr Geoffrey EJ Dennis, Global Emerging Markets, Equity Strategist, said at the 7th Citi India Investor conference here.
According to Mr Aditya Narain, India Strategist, Citi India, “With absolute or relative valuation, India will offer more on the upside at about 12-13 per cent by year-end. With less action in the economy, slower markets growth stands to reason. Despite tightness on the liquidity, however, valuations look decent.”
The cost pressures have slowed the earnings growth in the emerging markets and investors are now concerned with the bottom-up approach, Mr Dennis added.
Mr Narain placed his bets on the auto and capital goods sector as over weights among the hedging portfolio from the currency perspective. “We have also moved up the pharma sector which was an underweight till now.
“Earnings in the next couple of quarters look flat and expectations in FY13 to stay around 13 per cent of the Sensex,” Mr Narain added.
Rupee
According to Ms Rohini Malkani, Chief Economist, Citi India, “The medium term view on the rupee in the next 6-12 months will remain in 54-56 range.”
“The macro forecast is based on the estimate that oil prices are around $125 a barrel. However, if the prices fall to $105, the current account deficit (CAD) and the financing needs can be reduced by 20 per cent. This can give a leeway to the Reserve Bank of India on the rate front,” she added.
We expect the RBI to be able to cut 25 basis points interest rates for 2013. The GDP will remain range- bound at about 6-7 per cent.
On the euro markets, the company predicts Greece's exit from the Euro Zone by the end of December.
“There is 50-75 per cent likely chance that Greece will exit the Euro Zone by December. We will see liquidity injection by the central banks in the short term after the Greece exits. We expect the earnings of the global markets to grow by 10-12 per cent,” Mr Dennis added.
Citi has rated India ‘underweight' in the global markets.