BNP Paribas retains Sensex target at 42,000 for 2019, raises overweight stance on India

French brokerage BNP Paribas has raised its overweight stance on India and maintained Sensex target at 42,000 for 2019. On Wednesday, the brokerage said it was retaining its year-end targets for the benchmarks. Possibility of a stable government coming to power was already factored in into the 42,000 points target for the Sensex, while historically, the post-results euphoria has not sustained, it said.

"The euphoria is for short term from a market performance perspective and we have seen that it goes down in a month or two," its BNP Paribas Asia-Pacific Equity Strategist Manishi Raychaudhuri said.

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The brokerage is overweight on India, along with other Asian peers including China and Indonesia.

Valuations

On valuations, BNP Paribas head of India equity research Abhiram Eleswarapu said while the benchmark indices are valued high, there exist opportunities in the small and mid-cap space, which has seen massive corrections in the recent past.

The brokerage feels there can be some recovery in the telecom sector as the competitive pressures in the sector ease down.

Raychaudhuri also said there is a case for curtailing the government's role in state-owned companies, especially those which are running at a "sub-optimal" level.

Morgan Stanley on Sensex

On May 23 when election results were announced, Sensex crossed 40,000 level for first time ever and Nifty breached 12,000 marking an all time high, Morgan Stanley gave investors more reasons to cheer. According to the international brokerage, Sensex looked set to reach 45,000 level, a 10% upside from that level. Nifty too was seen hitting 13,500 by June 2020.

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Post elections outcome, focus will now shift to growth, Morgan Stanley said. It expects RBI to be more accommodative and said earnings could be heading into a new cycle.

The brokerage is overweight on domestic cyclicals, both consumer and industrials, as well as financials, and underweight defensive sectors including healthcare and technology. Morgan Stanley expects the RBI to be more accommodative and the economy to come out of its soft patch of the past few months.

Sensex has generated a strong 10.13% since the beginning of this year. Nifty too has gained 9.71% during the same period.

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Edited by Aseem Thapliyal