BOFA-ML continues to be bullish on the market and expect reforms to drive markets to our year-end target of 27,000.
What will drive the Markets ?
Kick-start the investment cycle, Liberalize FDI, Closure of Vodafone Tax Issue, Subsidy reduction and Introduction of GST / DTC.
Monsoon failure can lead to GDP downgrade. Sure. But another saving grace is that the buffer stock is relatively high and this can be used to meet the demand. Just by way of example, the buffer stocks of rice (20.6mn tons vs 9.8 MT norm and FY14 production of 106.3MT) and wheat (41.6MT vs 17.1MT norm and FY14 production of 95.9MT) are more than double the norm.
BOFA-ML expect markets to remain expensive through the year and our index target is based on a 16.5x PE. If we look at the 2009
elections too, the markets traded at 16-18x for the rest of the year. FY15. Markets will re-rate on announcement of reforms as
they anticipate an economic recovery next year.
