Deutsche slashes December Sensex target to 28,000

Global banking and financial services major Deutsche Bank today slashed its year-end Sensex target to 28,000 from 31,000 on concerns over global growth.
"The simultaneous combination of structural commodity deflation, sharp compression in global trade growth, deep emerging markets currency depreciation and the large dollarisation of emerging markets debt has raised the risks of an emerging markets contagion," Deutsche Bank said in a report.
According to it, financial market volatility would continue until commodity prices and emerging markets currencies stabilise.
"Till then the environment for FII flows into emerging markets will stay muted and risk premia will widen," the report added.

It further said, "The recent sharp sell-off in equity markets - including India - is a reflection of the rising fragilities of emerging markets."
However, the report noted that while India may not be able to stay completely insulated from emerging markets fragilities, the country "will stand out" on account of its attractive status as net commodity importer and because of the unique ability of its policymakers to reflate the economy.
"India is among the few emerging markets that have the ability to pump prime the economy through public investments as savings from oil can be channelised into productive capital expenditure," it said.

As per the report, global macro factors would predominate investor sentiment as well as determine RBI's action in the next credit policy.