Signage for the Bombay Stock Exchange (BSE) is Displayed Next to a Bronze Bull Statue at the Entrance to the BSE Building in Mumbai (Photographer: Dhiraj Singh/Bloomberg)

Citi Sees Bumpy Ride for India Stocks as It Lowers Sensex Target

(Bloomberg) -- Fatigue seems to have set into Indian equities after last year’s rally took the $2.3 trillion market into uncharted territory.

The S&P BSE Sensex may climb 5 percent to 35,700 in 2018, Surendra Goyal and Vijit Jain, analysts at Citigroup Global Markets India Pvt., wrote in a note dated April 8. The year-end target has been cut marginally to reflect higher volatility, earnings downgrades and a drop in local fund flows. The gauge jumped 28 percent in 2017 to 34,056.83.

The Sensex suffered its first correction in more than 15 months in March as a trade spat between the U.S. and China hit global stocks, and governance issues at banks -- the biggest industry group in the index -- hurt sentiment. While corporate profit growth has recovered in past two quarters, Citigroup says results for the current fiscal will disappoint the consensus estimate of 20 percent to 24 percent for NSE Nifty 50 Index companies.

Citi Sees Bumpy Ride for India Stocks as It Lowers Sensex Target

Some takeaways from Citi’s note:

  • Higher borrowing costs for financial companies, pressure in businesses such as healthcare and telecom will lead to lower-than-expected FY19 earnings.
  • Brokerage is overweight financial firms and automakers, and underweight on software exporters and consumer companies.

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