Sensex at 19K by year-end: Brokers

A majority of brokerages expect the bellwether Sensex to hover at 19,000 by the end of this calendar year, according to a poll conducted by Business Standard among top local brokerage houses.

The figure is significantly lower than last December when most brokerages had expected a 15 to 20 per cent return from 20,000 levels at the end of 2007. The Sensex has dropped over 25 per cent from its January peak of 20,800.

Of a sample of 20 brokerages, 60 per cent feel some pain is left in real estate and half feel capital goods may underperform over the next couple of quarters.

"No bids were received for two plots in the latest auction in the Bandra-Kurla complex by the Mumbai metropolitan development agency. This clearly shows slackening in Mumbai's commercial property market. This is true in the National Capital Region, Bangalore and across India," Head, Equity, Religare Securities, Amitabh Chakraborty, said.

"The private equity money flow to the realty sector has virtually dried up as credit gets dearer," he added.

About 40 per cent of the sample feels that financial services that include banking and brokerages are likely to suffer further as a result of uncertainties on account of mark-to-market losses logged by several leading Indian banks in their international investment books.

The Bombay Stock Exchange realty index has dropped 25 per cent followed by the BSE Bankex, which fell 24 per cent in March.

Pharma and Fast Moving Consumer Goods companies have emerged as the favourites with about 65 per cent of brokerages saying the "defensive" sectors seem a good bet in this volatile period.

The BSE Healthcare index had returned 16.52 per cent and the BSE FMCG index had returned around 20 per cent last year.

Other sectors that seemed to attract broking houses were public sector banks, pipes, automobiles and telecom.

Meanwhile, brokerages are emphasising the need to invest in selective stocks at these levels. "Investors can selectively enter but a 10 per cent downside is possible. There is strong support for the Nifty at 4,450 points," Head, Equity Research, IDBI Capital, Shahina Mukadam, said.

Added Hemang Jani, senior vice-president, Sharekhan, "It is extremely difficult to say if the worst is over at this point of time with low sentiment and negative news flow coming both from the US and domestic markets."

But he said slowdown concerns on domestic economy and earnings growth are "overdone" and current valuations are "attractive for investors to accumulate quality stocks in a phased manner".

De-coupling from the exigencies of the global economy — last year's prominent theme — seems absent this year as more brokerages feel that Indian markets may not see inflows for at least two more quarters.

"We do not see foreign institutional investors (FIIs) returning to the Indian markets until the de-leveraging of the US financial sector is sorted out, which may even take two or three quarters," said Apurva Shah, head-research (institutional equities), Prabhudas Lilladher.

"Till such time, FIIs, especially hedge funds, remain vulnerable to a liquidity squeeze," he added.

FIIs have net-sold equities worth Rs 14,513.5 crore (Rs 145.135 billion) in 2008, according to data from the Securities and Exchange Board of India website.

Broking houses expect FIIs to return to the markets once international market stability is restored and Indian corporate numbers start to roll in.