Large Institutional Investors continue to be bullish on growth and worried about inflation. Buy-side earnings expectations are in line with the sell side. Investors expect modest rate hikes totaling to 50bp for the rest of the year and almost unchanged 10-year bond yields. The Sensex is expected to close the year 10% higher from current levels, although it may hit an intra-year high of around 19,500. About two-thirds of the surveyed investors expect India to continue to outperform emerging markets in 2010 and about half of them are overweight India in their portfolios.
Stock picking seems to be the dominant theme with two-thirds of the investors voting for it as the best way to make money in 2010.
Investors seem unanimous in their opinion that global markets are the most critical driver of Indian equities. 25% believe that sovereign defaults are the biggest concern for India. Atleast 20% expressed inflation as their biggest worry for India.
Domestic sectors, led by Financials and Consumer Discretionary, are the favorite sectors whereas Telecoms and Utilities are the least favored. Mid-caps and gold lead the preferred asset class list while crude oil and real estate are at the bottom.
It is highly likely on the back of institutional consensus mid-caps equity stocks as the best performing asset class in 2010.