Domestic brokerage Ambit Capital cuts Sensex target to 28,000

MUMBAI: Domestic brokerage Ambit Capital has cut the Sensex target for second time within four months due to the delay in economic recovery. The new Sensex target for March 2016 would be 28,000, an upside of just 6% from Friday's closing. Earlier in May, Ambit cut its Sensex target to 32,000 from 36,000.

The brokerage on Friday said that there is a high risk of the Sensex dropping to as low as 22,000, as the odds appear to be in favour of a continued yuan devaluation. Despite the cut in target, the brokerage has kept the trailing Sensex P/E target unchanged at 20x on the premise that the structural positives emanating should improve the longterm fortunes of India.

"The combination of an enfeebled banking system, a sliding real estate sector and a PM determined to reset the way the Indian economy works make India a risky investment destination," said a report by the firm.

On the other hand, Ambit also downgraded the GDP growth estimate for FY16 from 7% yoy to 6.8% on the back of the events unfolding in China. India grew at a rate of 7.3% in FY 2015.

Some of the stocks recommended by Ambit includes ITC, Coal India, Lupin, Power Grid Corp, IndusInd Bank and Page Industries.