The Hindu Business Line : Sensex signals

Despite negative global cues, the Sensex has maintained a bullish tone. Good corporate performance and buoyant mop-up of direct and indirect taxes till October 2007, indicates the inherent strength of Indian stocks.

Sensex should easily cross 21,600 points by the year-end and any dip in the market can be viewed as an opportunity to pick up stocks. When the Sensex moved from 6,000 to 12,671 in 2005-06, there was a general feeling among the investing public that the market would undergo a correction. At the current levels also, similar apprehensions prevail.

There is no cause for the market to correct itself amidst reports of robust economic growth and lower inflation and a reasonable price-earnings ratio of around 25 times. Most of the sectoral indices are showing valuations at levels around 15-20 times.

Though there are apprehensions based on the high numeric level of the Sensex, the fears are not justified when one looks at the underlying data of most of the sectoral indices, except capital goods and realty sectors.

One may not be surprised to see the Sensex witnessing nearly 30 per cent CAGR in next three calendar years — that is to say, it may cross the 41K-mark in 2010! No other assets class can offer such high returns except equities.

There are a large number of stocks outside Sensex or Nifty which have started upmoves in recent weeks. That shows that bullish trends are gradually becoming widespread.

Bharat D. Momaya e-mail

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