Mahesh Nandurkar, executive director of CLSA India, said the outlook of Indian markets in 2016 is more optimistic as the economy is showing signs of recovery.
"Valuations of the market, especially large-caps, are in line with historical averages and appear sustainable," he said.
The corporate earnings are expected to grow at 15 per cent in FY2017 helped by the low base effect, he added.
Speaking about his assessment of global risks for Indian markets, he said, "The devaluation of Chinese currency yuan can be a greater risk than the US Fed rate hike."
Mr Nandurkar expects the dollar to strengthen in 2016. The US economy is expected to show upward movement in 2016 in terms of GDP growth and going forward emerging market currencies, including India's rupee, could be under pressure, he said.
Speaking about his sectoral preference, Mr Nandurkar said, "We are bullish on IT services sectors and the companies in the sector are expected to deliver earnings growth of at least 15 per cent in FY017. They will also benefit from the rupee depreciation."
"The other sectors on which we are overweight are private sector banks and four-wheeler base," he said.