Investors, post their company meetings, seem to agree that valuations were probably pricing in too much of good news, Merrill Lynch said in its note
The News International Team
Brokerage house Bank of America Merrill Lynch feels India is vulnerable to a near term global correction as too many global fund managers own shares in this market.
“One of our near term concerns has been that investors are very overweight India; this makes India vulnerable to any near term global correction,” says the Merrill Lynch note, adding that a macro recovery appears to be some way off.
“While we are structural bulls on India with an index target of 54,000 by end-2018, we have been highlighting that we see the market being range-bound to negative over next few months,” the note further says.
According to the brokerage, the pace of economic recovery as well as earnings recovery will disappoint investors near term.
“Investors, post their company meetings, seem to agree with our view that valuations were probably pricing in too much of good news. While we think the market will remain expensive through the year, we think it will consolidate for the next 3-6 months,” the note says.
Merrill Lynch is bullish on auto, banks, cement and oil. It expects pharma shares to do well near term as the market consolidates.
Its top largecap buys include ICICI Bank , Lupin , BPCL , UltraTech , and top midcap buys include Yes Bank , Voltas , Oberoi , Cadila .