 "Sensex, Markets")
The Indian market might continue to trade within a range due to the risk of earnings downgrades, CLSA, the Hong Kong-based equity broking and investment group, said on Friday, in its Greed & Fear publication.
The market, after gaining as much as 10 per cent, is six per cent down in 2015. "(Our) prediction this time last year was that the Indian market would most likely trade sideways in 2015, as the negative of ongoing earnings disappointments were offset by the positive of monetary easing. This pattern can definitely continue for a while longer. Indeed, there is a downside risk, given that the consensus earnings growth estimate for the next fiscal year is 20 per cent," said Christopher Wood, managing director.
The brokerage, however, remains "fundamentally bullish" on the Indian market in the medium to long term, which it defines as one to five years. Wood said recent headlines that CLSA was "no longer positive on the Modi government" were misleading, as it continues to remain overweight on India.
"Greed & fear still maintains a triple overweight in India in the Asia Pacific ex-Japan relative-return portfolio, while 46 per cent of the Asia ex-Japan long-only portfolio is invested in India. It is still the case for now that India remains a better relative-return story in the Asia and emerging market context than an absolute-return story, given the continuing lack of any evidence of a renewed private-sector capex cycle," said Wood.
The note added that 10-year government bonds are currently a "better investment prospect than Indian equities".
