Deutsche Bank Cuts Indian Stocks to 'Neutral'
Deutsche Bank has downgraded Indian stocks to 'neutral' from 'neutral/overweight' relative to other global emerging markets, saying valuations, after a sharp rally on Bharatiya Janata Party's (BJP) decisive election win, appear "very stretched" against lower GDP growth.
The Nifty has risen 24.4 per cent since September 13 when Narendra Modi was declared as BJP's prime ministerial candidate, with overseas funds pumping over $14 billion in the cash shares over that period.
"We acknowledge that there is the potential for massive long-term upside, but we suspect that there needs to be further economic pain before the agenda for more fundamental reform to governance practices becomes clearer," Deutsche said in a report on Thursday.
Deutsche says Mexico and China have also witnessed similar selloff in the past as reform euphoria in both markets waned, while Mr Modi's comparison with Margaret Thatcher raises short to medium term risks.
The investment bank says it still prefers India to the other BRICs, but advises non-emerging market investors to wait for a better buying opportunity.
Copyright @ Thomson Reuters 2014
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