Global financial services major HSBC has said slowing economy, election-related uncertainty and tighter monetary conditions pose risks for Indian markets and that the BSE Sensex is likely to hover around 20,250 by the end of this year.
It also cut private banks to "neutral" from "overweight".
"We are
underweight on India within Asia," HSBC said in a research note, adding that "Fed tapering, waning earnings momentum, and election uncertainty make us cautious on India... We are underweight (on) India in a regional context with our year-end 2013 Sensex target at 20,250."
The 30-share BSE Sensex is currently around the 20,000-level.
The key factors that made the global brokerage firm cautious on India included
deteriorating macro-economic situation, corporate profitability remains under stress, ensuing state elections (in Mizoram, Delhi, Madhya Pradesh, Chattisgarh and Rajasthan), followed by the general elections at the end of May 2014.
Moreover, it said, valuations remain expensive compared to other emerging markets and Fed tapering and prolonged US government shutdown could trigger outflows from India.
HSBC said export-oriented sectors such as healthcare and IT services, and US dollar proxies such as metals and energy are likely to fare better, while private banks are likely to suffer.
"We cut private banks to neutral from overweight and retain underweight on state-owned banks. We are also cautious on consumer discretionary and real estate," the financial services major said.
HSBC had in September
cut the GDP growth forecast for India to 4 per cent for 2013-14. On September 16, it had lowered India to 'underweight' from 'neutral'.
Further, after the Reserve Bank of India's
surprise repo rate hike last month, the team now anticipates 25 basis points of tightening by March 2014.
With inputs from PTI
PHOTO: Associated Press 
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