Deutsche Bank research sees Sensex touching 22,500 by December’2013. The “India Equity strategy: 2013 Outlook” unveiled by the Bank’s Equity Research cell observes that it is all about government policy certainty.
Abhay Laijawala, Managing Director and Head of Research observed that positive government policy action and rising risk appetite globally will be key themes in 2013. He observed that the politicians have realized that "Restoration of growth creates resources for welfare".
The first half of the year will likely be characterized by government and RBI action observes Laijawala and Abhishek Saraf, strategists, who added that this should be positive for the Bank, Infrastructure and Oil & Gas sectors. They see the considerable premium for the predictability accorded to the defensive sectors dilute as confidence in an improving macro rises over the course of the year.
Thus the top ten picks by the strategists include AXIS Bank, Bank Of Baroda, BHEL, Larsen & Toubro, Maruti, Punjab National Bank, Reliance Industries, Tata Steel, TCS and Ultratech cement. Among mid-cap, they prefer Bharat Forge, Dish TV, Financial Technologies, Indusind Bank, JPVL, M&M Financials, Tech Mahindra, Petronet LNG and Shree cement.
The Bank's economists see 100 basis points cut in interest rates by the RBI during 2013, with 25 bps cut to come through in January'13 policy review.
The strategists see setting up of the cabinet committee for investment, a step in right direction and feel a single nodal body would accord fast track approval to stalled projects. The Research houses capital goods team believes that the cumulative value of stalled projects stands in the vicinity of $100 billion.
This and the fact that government spending increasing in infrastructure projects perhaps leads at least two Capital goods Majors L&T and BHEL as well as cement majors Ultratech and Shree Cement featuring in their top picks apart from Reliance Industries and Petronet LNG in the oil & Gas space.
On the global front, the Bank's economists see first half of 2013 seeing reversal in Chinese growth, while Europe will see some growth reviving in the second half. US growth is seen at 2%.
As per Laijawala the inflows from FII's into India remain strong as is evident from initial part of January seeing $2 billion worth of inflows. India continues providing strongest Hedge and an attractive destination for global pension funds as they are assured of at least 8% returns.