Goldman Sachs remained "underweight" on Indian shares in its Asia Pacific portfolio and maintained its Nifty target at 5,700, saying the macro outlook remained challenged, which coupled with tighter financial conditions may lead to lower valuations.
The investment bank says India's corporate health and asset quality of banks will remain under pressure, while positioning risk and election uncertainties are likely to linger as well.
Also, the bank added that major emerging market/Asia active managers were still overweight on India by 3-4 percentage points and so any meaningful retail redemptions or decrease in allocations could put pressure on equities.
"Every 1pp (percentage point) decrease in India OW allocations could translate to net outflows of US$3.5 billion, as per our estimates," Goldman Sachs said in a report on Tuesday.
Goldman continued to like exporters over domestic-demand oriented sectors, citing improving external growth.
Copyright: Thomson Reuters 2013
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