Sensex to touch 21,700 by FY14: Nomura

Rupee would hold on to 56 levels to the dollar by December, the brokerage firm added

May 29, 2013 3:18 IST | India Infoline News Service
Tokyo-based brokerage firm Nomura on Tuesday said that it expects the BSE (Bombay Stock Exchange) benchmark Sensex to touch 21,700 points by FY13-14 which is currently trading at around 20,177.

Nomura India’s chief economist Sonal Verma said the growth number for the fourth quarter, expected to be released on Thursday, may not be encouraging. Downgrade cycle is sort of evening out.

The consumer price inflation will moderate closer to 8% by the end of the fiscal against the current 9%. The WPI (wholesale price index) inflation will remain subdued this year.

The falling inflation rate will provide room for RBI (Reserve Bank of India) to cut in the interest rate by up to 0.5% by December, she said.

Sectors such as banks and real-estate will benefit from falling interest rates, while sectors like consumer and pharmaceuticals will continue to show growth.

The RBI will also be undertaking liquidity infusing measures like open market operations or government bond buybacks and cut the cash reserve ratio. It will do OMOs of Rs. 1.2 trillion-Rs. 1.3 trillion during the fiscal and cut the CRR by 0.25% at its upcoming mid-quarter review on June 17, she said.

The current account deficit in India is a big problem due to weak exports and high commodity prices. The CAD is expected to be at 4.3% in FY14 against 5% estimated for FY13. However, CAD still remains high.

On the rupee which has shown weakness of late, Verma said it would hold on to 56 levels to the dollar by December.

There is hardly anything happening in terms of new projects. However, the government is giving some clearance to infrastructure projects. Still there a lot of balance sheet issue. Many companies have seen leverage in the last two years.

On the fixed income front, Verma said there is further scope of easing in the bond yields as the Reserve Bank unleashes more rate cuts and the yield on the 10-year benchmark could go down to 7.2 per cent by end of December.

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