Deutsche sets Sensex target at 24,000 by December

The Sensex is likely to scale 24,000 mark by December-end on receding chances of a fractured verdict in the upcoming Lok Sabha elections, lower inflation and improving global risk appetite, German brokerage Deutsche Securities said on Tuesday.

The 30-share BSE benchmark ended at 21,209.73 on Tuesday.

The Sensex is trading at 14x (in line with long-term average), and we expect 15 per cent EPS growth for Sensex in FY15. We have a Sensex target of 24,000 for December, at which Sensex will trade at 15.8x, in line with average of past five years, Deutsche said in a report.

This is in line with the MSCI India which is also trading at 14.1x, while its premium to MSCI Asia-ex-Japan has come down marginally to 29 per cent from 32 per cent in January, the report said.

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The Indian market outperformed most of its key emerging market (EM) peers like Thailand and Indonesia in February, with the Sensex rising 3 per cent in the month and 1 per cent YTD for the year, it said.

Deutsche said the market is driven by decreasing likelihood of a fractured verdict in the general elections, both WPI and CPI inflation dipping by more than 100 bps in January MoM and improving global risk appetite.

In dollar terms, the Sensex was among the top performing indices globally as the rupee appreciated 1.5 per cent on improving risk sentiment for EM assets.

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The BSE capital goods index was the top performing sector (+9.4 per cent), followed by autos (+8.9 per cent) and healthcare (+7.2 per cent), while key underperformers were metals (-5.4 per cent), realty (-0.7 per cent), FMCG (-0.5 per cent) and oil & gas (-0.3 per cent).

The report pointed out that in February, fiscal discipline continued, vote-on-account desisted from populism and diesel prices hiked despite concerns to contrary.

In the interim Budget, the government commendably desisted from populist measures (like farm loan waiver in an election year), endorsing commitment to fiscal consolidation. 

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Similarly, the latest diesel price hike announced last week sent a strong signal that calibrated fuel price rationalisation will continue, the brokerage said.

The report said FII inflows have revived for equities and continued strongly for debt.

FII flows in equities, which had turned mildly negative in January, turned around last month, with India witnessing $322 million inflows, second only to Indonesia among the emerging Asian peers.