Constructive on Indian market: Deutsche Bank

Deutsche Bank continues to remain positive on the Indian equity market, despite it coming off six per cent from recent highs.

“We remain constructive on the Indian equities market. Central bankers around the world will continue to boost liquidity to prevent any systematic crisis,” said Abhay Laijawala, head of research at Deutsche Equities India.

Deutsche Bank's Indian broking arm has a target of 18,000 on the Sensex for the ongoing calendar year, but believes the target could also be overshot in the next couple of months. “As a result of global central banking pumping the world with liquidity, it is likely this target will be overshot,” Laijawala said on the sidelines of the bank's three-day annual investor conference.

Adding: “We have seen two longer-term refinancing operations (LTROs) by the European authorities, which have pumped in close to $700 billion of liquidity in the system. The US Fed has been hinting it will keep interest rates low for a far longer time than one had anticipated.”

Pratip Gupta, head of equities at Deutsche Equities India, believes the Indian market will continue to attract even more foreign institutional investors’ money, as a lot of them are still underweight on this country. “We have seen about $7 billion of FII money coming into India. That seems a lot of money but small when compared to the size of the Indian markets,” he said. “A lot of foreign investors have missed this rally, as the market went up too soon and too fast. Still, there are many FIIs who are underweight on India and there is potential to attract lot of more FII inflows.”

The equity strategists at Deutsche believe the pace of the current market rally will be determined by three key domestic events of this month—election results, central bank credit policy and the Union Budget. “India's fundamental outlook will depend on how the Budget and steps towards fiscal consolidation through subsidy rationalisation pans out, and how the monetary policy evolves,” said Gupta.

Deutsche Bank, however, believes a spike in oil prices due to geopolitical tensions will be a big risk for the markets. “If crude oil prices rise significantly above $130 a barrel and sustain at those levels, it will be a big risk for the Indian market,” said Gupta.