How Analysts Got The Year End Sensex Targets Hopelessly Wrong?

Business

oi-Sunil

By Sunil Fernandes

Published: Monday, December 21, 2015, 9:08 [IST]

The year 2015 began with the Sensex trading around the 27,700 points and with a few trading sessions left in 2015, we are at 25,500 points.

At the start of the year, no analyst would have predicted current levels for the Sensex. Most analyst had predicted much higher levels, including 30,000 and 32,000 points on the Sensex.

In June Deutsche Bank predicted Sensex target of 31,000 points, while Citi projected 32,200 points and HSBC projected 26,900 points.

Name brokerage	Sensex Target
Deutsche Bank	31,000 points
Citi	32,200 points
HSBC	26,900 points
UBS	8700 points (Nifty target)

UBS earlier this year cut Nifty target to 8,600 points by the end of 2015 and we are near 7761 points on the Nifty. A good 1000 points away.

None of the analysts seem to have got it correct this year, though one must admit that HSBC has been the nearest.

What went wrong in 2015 for shares?

The Sensex is down by more than 2000 points from the start of the year. Nothing seems to have gone right for the markets. Quarterly results have been woeful, reforms have been stalled in parliament, the US has hiked interest rates and Chinese growth rates are a worry.

As we head into 2016, there are again targets in excess of 30,000 points being set by analyst. At the moment, it seems difficult to see how we could get there. At best it could be another year of stable returns, though we may not end-up having negative returns for the second year running.

The bets are on the earnings cycle reviving and the Reserve Bank of India cutting interest rates further. However, while the former may happen, it's doubtful if the RBI may cut interest rates by more than 50 basis points through 2016.

So, what should be the strategy for 2016?

The best bets for 2016 could easily be beaten down stocks from the metal and oil and gas space. It's unlikely that commodity prices would dip any further. So, good bets would be stocks like ONGC and Cairn from the oil and gas space and NMDC from the metal space. ONGC and NMDC are stocks that give good dividend yields as well.

Pharma stocks are currently plagued with US FDA worries and IT stocks have growth concerns. Select stocks from the beaten down banking names could also be good bets.

All in all, you could end-up getting 10-15 per cent gains on the Sensex next year. How individuals stocks would depend on a whole lot of other factors that affects each stocks individually.

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