Sensex may hit 29,000 by June 2009 - Will it be true ?

Like Mumbaikars caught unawares by the recent spell of cold wave, investors have been struggling to adapt to the recurring bouts of volatility on the bourses over the last one month. But the weathermen of Dalal Street are expecting sunny skies by the end of this calendar year. Five of the six participants at the ET Round Table see the bellwether BSE Sensex between 20-22,000 then.

The panelists included Narayan Ramachandran, MD & Country Head, Morgan Stanley; Pankaj Vaish, MD & Head equities and fixed income, Lehman Brothers; Ved Prakash Chaturvedi, MD & CEO, Tata Asset Management; Gaurang Shah, MD, Kotak Life; Rashesh Shah, CEO, Edelweiss Capital; and Motilal Oswal, Chairman, Motilal Oswal Securities. The session was moderated by Ramesh Damani, director, Ramesh S Damani Finance.

Only one participant, Ved Prakash Chaturvedi felt that the market was likely to be around 18,000 levels on December 31, 2008. “But that does not mean that mutual fund investors will not make money,” he added.

Mr Ramachandran expects a modest performance by the Sensex in the current calendar, but expects the benchmark to touch 29,000 by June next year. Slowing corporate earnings is one factor that most market watchers feel could hold back the market. However, the ET panelists are not too worried about it.

According to Mr Ramachandran and Mr Vaish, interest rates are showing signs of slackening and that could provide a support to corporate earnings over the next couple of years. “These (recent outflow of FII money) are not big things...they are just minor....India has attracted a lot of money and most of it came because of the fact that India is an attractive destination for money,” said Mr Ramachandran. “The real thing that will decide is where fundamentals are going. I feel that they (fundamentals) are solid,” he added.

Mr Shah felt that issue was not about whether earnings will grow 18% or 12%, but about the rate at which the Indian GDP would grow. ”If you expect corporate earnings growth of 11-12%, it means we are looking at a GDP growth of 4.5 to 5 to 6%. But if you expect GDP growth rate to be around 8%, give or take 200 basis points, then a 17-18% corporate earnings growth is not difficult. And I haven’t seen anybody—Indian or global—question India’s 8% GDP growth rate,” Mr Shah said.

While foreign funds have pulling out over the last few months, domestic liquidity has been a strong pillar of support and this trend is expected to continue, feels Mr Chaturvedi. “The kind of money we have seen that has flown in from the domestic investors in the last one year is certainly heartening,” said Mr Chaturvedi. “My guess is that if you combine insurance and mutual funds and other (domestic) sources of inflows into the market, close to $2 billion of fresh money is coming into the market every month,” he added.

Mr Gaurang Shah sees more investors tapping the stock market through Unit Linked Insurance Plans (ULIPs), mainly because of the handsome returns these products have delivered in the last four years of the Bull Run.

He excepts inflows of roughly $5 billion through various insurance schemes during the current quarter, a significant portion of which will be accounted for by ULIPs.

“I think relative disadvantage of insurance as a instrument vis-à-vis other fixed interest products has come down, which is also because real interest rates have reduced across the world over the last 10 years. So I see money continuing to come in,” he said.

Einstein too has a place here

India could be one of the best places to invest in for many years to come, affirm panelists

What happens when you put the India heads of two large Wall Street banks, two entrepreneurs who’ve founded and run popular brokerages and two fund managers who manage crores of investor money in one room? You get sharp insights, wry humour and an affirmation that India could be one of the best places to invest in for many years to come.

All this and more happened one Thursday morning, when ET brought these top capital market experts together, with Ramesh S Damani, a well-known face of the stock broking community in India, as moderator. The current state of the financial markets, enunciations of Budget wish lists and suggestions on how the stock market could be made more efficient, flew across the table over cups of tea.

Setting the agenda by an apt quote from Kahlil Gibran: “Progress lies not in enhancing what is, progress lies in enhancing what can be,” Damani steered a discussion that saw participants apparently unfazed by the recent turmoil in the market and foreign funds continuously pulling money out of India. “When you drive the boat very close to the coast, you see the zigs and zags in the coast,” said Narayan Ramachandran, MD & country head of Morgan Stanley, evocatively referring to the daily net sell by foreign funds. “But when you look at it from above, it is pretty much a straight line,” he reminded the gathering.

However, there was a consensus that corporate earnings have been slowing down. Pankaj Vaish, managing director at Lehman Brothers put a number to 18% deceleration over the next couple of years and a further deceleration from there. In spite of that, though, he felt the market was attractively valued.

The state of the derivatives segment also spurred many comments from the participants present. While Motilal Oswal said that the current payment system is only geared for normal days but not for extraordinary ones, Rashesh Shah of Edelweiss Capital said that the need of the hour is to make the market more “heterogeneous” as only this will erase the “one sightedness” among current investors.

On how the government can lay the road map through the Budget, Tata Mutual MD Ved Prakash Chaturvedi, was for disincentivising short-term trading, while Ramachandran wanted hig priority for the developing bond market and Gaurang Shah of Kotak Life Insurance bet that a change in tax on the physical infrastructure side was likely, while on social infrastructure side, he wanted investments in education.

With numbers and prognostications flying about, Damani parried a query on a one-year Sensex target with a light aside: after Albert Einstein died and reached the gates of heaven, St Peter asked him to temporarily share lodgings with three others till he was alloted space. St Peter introduced the room-matesby their IQ levels. As two of them had IQs of over 200, Einstein decided to discuss his theory of relativity and global warming. St Peter then pointed to the third person and apologetically said he had an IQ of just 60. “No problem,” said Einstein, “We can discuss where the stockmarket is headed.” QED!


Link to the article: http://economictimes.indiatimes.com/Sensex_may_hit_29000_by_June_2009/articleshow/2790463.cms