We expect markets to go into a consolidation phase during monsoon (because of El Nino) and restart its upward trajectory from Dec’14 qtr onwards (as people start pricing in FY16E). If GDP growth picks up from <5% to ~6.5% in next three years we expect earnings growth to pick up. Potential earnings growth can improve from ~15% in FY15E to 20% or above that in FY17E
Recommend to remain invested in Indian equities as the upside risk could be higher than the downside risk. Expect equity returns to be in line with earnings growth of ~17-18% for next 3 yrs. We expect 7000 on the Nifty & 23,500 on the Sensex to be the new floor. These are the levels seen on the exit poll day when expectation of NDA formation started to build in (i.e.12th May’14).
Our Sensex range remains at 23,500 to 28,000
