UBS sees green shoots of recovery, raises Nifty target to 8,000

Global financial services major UBS has said green shoots of recovery in business sentiments as well as economic activity in India are visible in select pockets.

The Swiss brokerage firm has set a Nifty target of 8,000 for this year end.

"The uptick in economic activity is evident from the recent stronger IIP numbers, improvement in manufacturing sector growth and passenger vehicles sales," UBS said, adding that there has also been rise in cement and power production.

"However, goods vehicle sales are still declining, consumer sector volumes continue to remain muted," the report from the global financial services major said, adding that fiscal consolidation by the government and yet weak real income trends will continue to dampen near-term consumption.

UBS also said it is bullish on Indian equities.

"Our Nifty target for end-2014 is 8000," the brokerage said, adding that there could be upside to the target based on how policy-making evolves.

On July 24, the BSE Sensex ended at a new peak of 26,271.85 while the NSE 50-stock index Nifty scaled 7,800-mark for the first time.

"We remain bullish on Indian equities nevertheless as current valuations are not expensive in our view and growth recovery hopes will likely ensure premium valuations," UBS said in a note.

The report further said that business sentiments are showing clear signs of improvement, but new capex remains muted and unlikely to recover in the near-term, even though the amount of projects under implementations remains high.

The Cabinet Committee on Investments (CCI), with the push of the Project Monitoring Group, has been clearing a lot of stuck capex projects - 159 projects, of the 446 accepted for consideration, have been cleared.