(PTI) French brokerage BNP Paribas on Thursday said it has retained its cautious view on Indian equities and finds the market valuations expensive.
The brokerage said it expects the 50-share benchmark Nifty to be at 19,250 points by March 2024 against its Thursday's close of 18,107.85 points.
"We expect only modest returns in equities; retain our cautious view (on Indian equities)," its analysts wrote in their 2023 outlook, acknowledging that India was among the top-performing markets in 2022.
From a macroeconomic perspective, it said there are positives like the decline in commodity prices easing the pressures, the pressure on the current account deficit and the rupee behind us, an intact fiscal position in FY23 and the RBI nearing the end of its tightening cycle.
The lagged impact of sharp interest rate hikes of 2022 will weigh on global growth in 2023, the brokerage said.
Though foreign institutional investors returned to investing in India in 2022, there is a risk of outflows in 2023 as China opens up, it said.
"We continue to find the market valuations expensive, based on various metrics we track. We retain our cautious view on the market and introduce our NIFTY index target of 19,250 for March 2024," it said.
The brokerage said it will advise being selective in stock selection and is overweight on financials, information technology and telecom space.
It is cautious on the industrials (where it is underweight) and the overall consumption space, which includes autos, consumer staples and discretionary/retail on either valuation or demand concerns.
The consensus earnings expectation over FY23-25 is 16 per cent on a compounded basis, factoring in margin improvement in FY24 in each of the 21 sectors, it said, adding that in FY23, earnings cuts have been lower at 4 per cent due to upgrades in the BFSI sector that saw margin improvement amid a steep increase in interest rates while deposit rate hikes are now following with a slight lag.