The Hindu Business Line : Market View

Taking a view on the equity market after a steep correction from the peak levels requires a good assessment of the liquidity drivers. Even if we agree that fundamentals are good, for the market to swing back into a clear upturn, volumes and large doses of liquidity are vital.

After the market corrected in May, not only have FII flows trickled down, after turning negative, IPOs and mutual fund mobilisations have also dropped drastically. While there is no flight-to-safety concern that could lead to funds being pulled out of the market by institutional investors, there is little to support the view that these flows will resume the levels seen in the first four months of the year. Therefore, lower volumes could be the technical reason keeping the market range-bound in the near term.

Optimix

Corporate results for Q1-07 point to continued growth in corporate earnings. Valuations have turned attractive following the decline in the market level from its peak. The Sensex is currently trading at around 15.8x the estimated one-year forward earnings. Non-frontline stocks are trading at even lower multiples. This indicates a moderate outlook for the market over the medium to long term. There is a need to invest with a medium- to long-term view, have reasonable expectations and be tolerant to volatility.

HDFC Mutual

Ideally, the RBI would like to maintain a gap of 50-75 basis points above that of the US and other G-3 countries in order to attract and retain foreign capital, which might provide comfort on the current account deficit aspect as well as some strength to the weakening rupee. The 10-year gilt should range between 8 per cent and 8.50 per cent depending upon the inflation expectations and credit growth.

PruICICI Mutual

A significant proportion of earnings announcements, especially from the bellwether companies, have bettered expectations for the quarter.

Though seasonal as well as one-off factors can influence quarterly results, a continuation of these trends could lead to possible upward revisions in earnings expectations from Corporate India for the current year. This may provide a strong base to current market valuations and improve the long-term return potential for equities.

Franklin Templeton Investments

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