JOIN USSensex may hit 33,954 by September 2017: CLSA
CLSA, Asia’s leading and longest-running independent brokerage and investment group, has forecast Sensex to hit 33,954 by September 2017 in its latest report.
“Corporate earnings have remained quite weak over the past four years. There is also a likelihood of more earnings estimate cuts to FY16 and FY17 forecasts due to the possibility of stagnating global demand leading to lower commodity prices and a weaker rupee. However, we believe that a combination of our four themes of low inflation, developmental politics, more transparent government policies and a greater shift of household savings to financial assets will lead to corporate earnings growth of 16-18 per cent over FY17-19 and expect the market to deliver a cumulative 34 per cent return,” CLSA’s Mahesh Nandurkar said in note dated September 11. As per CLSA, at the current Sensex value of 25,318, the Sensex 2017 target (two-year target) will be 33,954. The brokerage firm is also bullish about the prospects of lending rate cuts by Indian banks over the next two years.
Room for further rate cut
“As the RBI cut rates by 75 basis points (bps) during 2015, banks lowered deposit rates by 80 bps and slashed the base rate (lending rate) by a much lower 25-30 bps. Banks thus have room for a further 50bps reduction, as the average cost of funds begin to reflect lower deposit rates over the next 12 months,” CLSA said.
Additionally, a period of stagnant inflation for global commodities is likely to cause flagging Indian CPI inflation, as the impact of a lower wholesale price index (WPI) and weaker property prices begin to filter through into reduced wage inflation, ultimately driving lower inflation in various services items. If the CPI stabilises at about five per cent, RBI’s repo rate may come off from 7.25 per cent by another 75-100bps over the next two years.
Bank lending-rate cuts could easily be 50 bps higher i.e. about 125-150 bps of lending-rate cuts, CLSA added.
Optimistic approach
Brokerage and investment group CLSA forecast Sensex will hit 33,954 by Sept ’17
Expects corporate
earnings growth of 16-18% over FY17-19
The brokerage firmis also bullish about the prospects of lendingrate cuts by Indian banks over the nexttwo years