The Indian equity market has grown by around 80% this year. In other words, the money you had invested on the indices last year, has now nearly doubled. And in case of some other stocks, it could be more. So from a year that seemed to lead you to a mishap, equity markets have bounced back.
Now, will this continue? Is the question doing the rounds. And here, while it is easy to get some quotes Fe Investor looks at what some leading institutions have to say. Analysts at Goldman Sachs are of the view that there would be uncertainty ahead reckon that there would be a lot of surprises. Some of them would be Tata Motors, Zee Entertainment, Titan and even Tata Steel as businesses consolidate and earn from the effort they had taken to build brands in the previous year.
Analysts at UBS think valuations are fair at the moment, their analysts are of the view,? Equity and credit valuations are ?fair?, global growth remains uneven, and in 2010 market volatility may increase. Yet we opt to increase allocations to equity, credit, commodities, and real estate for 2010.
They are also e are forecasting that the world growth in both 2010 is around 4.4% and in 2011 is better at 4.5%, thanks to the strong growth in the emerging markets, led by the BRICs. that is Brazil, Russia, India and China. ?Consequently, the BRICs are likely to contribute more to world consumption growth than the advanced economies and other emerging markets in the next two years,? says another Goldman Sachs report.
So on the macro-front things look sanguine, especially on the inflation front that could dismantle the interest rate regime. They say, ?India?s inflation may see some acceleration in 2010-11 as supply-side inflation pressures build. Although the current account deficit will widen in India, strong capital inflows due to both growth and rate differentials should easily finance the deficit and put upward ressure on the Indian rupee.?
?We are seeing broad based growth signalling a steady recovery. As the business cycle progresses, the investment cycle should pick up as well. In addition, a stable government that is focussed on moving ahead with the divestment process and stepping up infrastructure spending should support the recovery,? says Sandeep Kothari, Fund Manager. Corporate earnings have been positive and as the economy continues to show improvement, the earnings cycle will become more robust.
On that backdrop, current valuations appear to be fair, he adds, ?Corporate earnings have been positive and as the economy continues to show improvement, the earnings cycle will become more robust. On that backdrop, current valuations appear to be fair?.
And fairness is the current word doing the spaces in the equity markets world. ?The Indian market is attractive and yet valuued fairly…? says a leading fund manager with a global hedge fund. He reckons, along with a lot many that the execution of infrastructure would be the key factor.
BNP Paribas’ Asian equity strategist Clive McDonnell says that the important change in view for emerging markets to underperform developed markets in the first half of 2010 as foreign fund inflows slow. The expected cause is a protracted appreciation of the US dollar, reflecting the withdrawal of stimulus by the Federal Reserve and a likely strong multi-quarter recovery in the US economy, driven by restocking and renewed maintenance capacity expansion re=estocking and renewed maintenance of the capacity expansion.
Analysts at Enam reckon, ?The reversal in the fortunes of the dollar will keep emerging markets under pressure in the short-term and fears of a lurking CRR hike will keep the domestic markets on tenterhooks?
The concern therefore for 2010 is where will the liquidity flow and how fast. For long tem investors, this should not be a bother. For traders, the ‘L’ word would dominate