Mumbai: Setting a target of 29,000 for Sensex by December 2016, financial services major Deutsche Bank on Thursday said India continues to be a favoured emerging market but it is now more due to "compulsion" rather than by "choice".
In a report, the bank listed the elusive recovery in earnings growth as the single biggest disappointment for investors, particularly since the election verdict in 2014.
It also said the sharp variance between high expectations and actual earnings have started to test investor patience. "As we head into 2016, widespread investor optimism on the policy and macro environment—following the record election verdict and the sharp decline in global commodity prices—has been replaced by a more conservative realism on earnings recovery emerging as the most determining market catalyst," it said in a report, 'India Equity Strategy: 2016 Outlook'.
The firm said while India continues to be a favoured emerging market, "it is now more due to compulsion than by choice, as was the case after the election."
It also noted that an improving macro and a landmark political mandate for the ruling BJP government has failed to drive the much anticipated earnings turnaround. “While there is understandable investor skepticism on earnings recovery, we believe that corporate earnings are likely to turnaround in 2016, benefiting from an urban consumption recovery, a positive multiplier impact of government’s push on public investments," Deutsche Bank said. “We are setting our December 2016 Sensex target of 29,000," it added.
At present, the benchmark BSE Sensex is trading within a 25,000-26,000 range. “Improvement in corporate earnings has now become the most critical driver for market confidence with investor patience beginning to thin," the report said.
In September, the German brokerage had slashed its 2015 Sensex target to 28,000 from 31,000 over global growth concerns.
