Mumbai, May 23: Deutsche Bank has downgraded domestic equities at a time brokerages are gung-ho about India’s economic prospects, with the Narendra Modi-led NDA government coming to power at the Centre.
The investment bank in a report cut Indian stocks to neutral from overweight, relative to other emerging markets.
A key reason behind the downgrade was a spurt in share prices after the NDA announced Modi as its prime ministerial candidate in September last year. Since then, the Sensex has gained more than 25 per cent.
The Deutsche Bank report pointed out that while valuations had risen on account of the sharp rally, underlying economic fundamentals continued to worsen and cautioned investors against rushing into the market.
According to the investment bank, while MSCI India is marginally cheap compared with its 10-year history, it is expensive by around 7 per cent vis-à-vis other emerging markets.
The MSCI India index is a free-float adjusted market capitalisation weighted index designed to track the performance of shares listed on the NSE and the BSE. The MSCI’s current value appears excessive given the sharp slowdown in GDP growth over the past three years.
However, valuation worries were not reflected in the markets today with both the Sensex and Nifty hitting new closing peaks. The Sensex surged 319 points, or 1.31 per cent, to end at a new historic high of 24693.35. The Nifty gained 90.70 points, or 1.25 per cent, to end at 7367.10.
Retreating from an 11-month high level, the rupee today depreciated five paise to end at 58.52 against the dollar but managed to clock the fourth successive weekly rise.
At the forex market, the rupee commenced slightly better at 58.45 from the previous close of 58.47. It then moved in a range of 58.33 and 58.56, before settling at 58.52, a fall of five paise, or 0.09 per cent..