Credit Suisse today unveiled a new target of 17,000 for India's Bombay Stock Exchange Index (Sensex) benchmark index. The Sensex closed at 15,903.83 yesterday.
Nilesh Jasani, Credit Suisse head of research for India, noted at the inaugural Credit Suisse India Financial CEOs Conference in Mumbai earlier this week, that the bank has maintained overweight calls on high-beta sectors like real estate, materials and private sector banks in both its short- and long-term portfolios.
Jasani believes corporate earnings forecast upgrades would drive the Sensex to a level of 17,000 by mid-2010. The new index target, revised upwards from 13,500 previously, comes amid regional and global index target upgrades from Credit Suisse strategists based on the same theme: earnings upgrades.
The revival of the corporate cycle had been heavily assisted by the Reserve Bank of India's quantitative easing of policy interest rates. While the market has mostly focused on the cash reserve ratio and repo/reverse repo rate components of monetary policy, Jasani believes the monetary support for the economy and what is flowing into the market should be looked at more comprehensively.
Jasani adds that there would be medium-term benefits from the enhanced liquidity environment as well, arising out of corporate India raising funds at a low cost from the capital markets. This should benefit their bottom lines, he says, not just through low financing costs but also because of the investment activities started with these funds.
Credit Suisse is by no means in the minority when it comes to its optimism over India, which is a market that is expected to rival China in terms of the attention of investors. In June, BNP Paribas recommended its clients to reduce their exposure to China, which it has lowered to neutral from overweight, and increase their allocations to India, where the bank remains overweight. BNP Paribas' own target for the Sensex is 16,500.