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Euphoria laced with caution

Mumbai, May 18: Brokerages are expecting a further rise in the key stock market indices, though some have advised restraint.

They maintain that the decisive mandate in favour of the BJP-led NDA in the Lok Sabha elections will ignite more fireworks on the bourses.

The brokerages are optimistic even as the Sensex and Nifty fell sharply off their all-time highs on Friday in afternoon trade because of profit-booking, with the Sensex once soaring almost 1500 points in less than an hour’s trading in the morning.

Many brokerages, particularly the foreign entities, are now setting higher targets for the year on the expectation that a clear majority for the BJP will enable the new government to avoid the challenges associated with coalition politics and allow it to take bold decisions.

Deutsche Bank has raised its December 2014 Sensex target to 28000 on May 16. Macquarie raised its target for the Nifty to 8400, while UBS revised it to 8000 from 6900. The new targets imply an upside of over 16 per cent for both the key indices from their current levels.

“The historic verdict justifies a re-rating of the Indian equity markets. We are raising our December 2014 Sensex target to 28000 and strongly believe we are on the cusp of a structural bull market,” Deutsche Bank said.

“We now have the situation after a gap of 30 years where a single party can form the government on its own. This is very positive and it takes away the drawbacks associated with coalition politics that we have seen so far and the impact of this development will be positive for the markets,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services, told The Telegraph.

However, a section of the market thinks otherwise. After the strong rally in the past few sessions, where records were being broken daily, analysts believe the stock prices will trade within a range in the coming days.

The focus is now expected to shift towards the formation of the government and the allocation of cabinet berths.

“The first 100 days of the Narendra Modi-led government will be crucial as it will provide indication of his growth agenda. The investors will give the new government a time frame of up to six months after which it will have to start delivering,” an analyst with a foreign brokerage, who did not wish to be quoted, said.

In fact, meeting the lofty expectations of the bourses is being seen as a key challenge for the government.

 
 
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