The general elections could prove to be a “big swing factor” for the Indian stock market going ahead, financial services major HSBC said while putting a Sensex target of 21,750 for end-2014.
The Indian market has seen a modest gain of 8 per cent in the current year, but underperformed significantly in US dollar terms as the Indian rupee depreciated sharply in the second half of the year, the company said. According to HSBC, the “storm has abated” for the Indian markets as the US Fed has deferred tapering of its quantitative easing stimulus, and as the new RBI Governor Raghuram Rajan has taken steps to contain the rupee fall.
However, “structural imbalances and the election uncertainty should keep the outlook for 2014 clouded”, HSBC said. “We expect Indian equities to deliver a below average return of 3 per cent in 2014, while earnings should grow by 8-10 per cent,” the HSBC report said.”We are underweight India within the region context with a Sensex target of 21,750 for end-2014,” it added.According to the global brokerage major, the upcoming general elections could be a “big swing factor” and an “inflection point” for the Indian markets.”In our view, if BJP-led National Democratic Alliance comes to the power, it would be positive for infrastructure -led sectors, while a Congress-led UPA government would be positive for consumption-led sectors,” it said.