Citi lowers Sensex target for June 2016 to 29,300 from 35,500

MUMBAI: Citi has cut its Sensex target by 16% citing disappointment in earnings growth, government reforms and investments. The brokerage trimmed its Sensex forecast to 29,300 by June 2016 from 35,000, while assigned a target of 32,000 by December 2016.

“We argue these catalysts are in transition and will take time,” said Citi’s Aditya Narain and Jitender Tokas in a client note. “These key indicators are looking up and coming together these should progressively drive economic activity and markets.” Citi is overweight on financials, energy, pharma, autos, cement and utilities.

The brokerage said there have been 15-20% cut in earnings over the past 12 months at regular intervals spread across quite a few industries.

The downgrade cycle has been sharp and the pace of downgrades has peaked ahead of emerging market peers, it said. “The market with significant earnings cuts has reset lower. We would argue that we are now very close to an earnings bottom,” the analysts said. “The earnings trajectory is fairly balanced again across sectors, which should limit earnings concentration risks.”