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More upside than downside in Indian equities

Posted by fairval on January 5, 2012

Time to shed some of the pessimism now about Indian equities. One reason is simply the math. The Marketmatrix that we follow suggests there is less downside than upside to the market. As I wrote earlier, the downside to the 2011 forecast held very well thru the year, despite all pervasive negative news

Also, while i havn’t checked advance-decline for 2011 yet, I think this will be better in 2012. This is the most important thing for retail investors. If advance-decline is more than 50%, you will most likely make money.

This is how I think 2012 could pan out —

Likely Sensex Trading Range 2012

As this suggests, Sensex may not fall below 15k for any length of time. If sentiments improve, then the trading range may extend to 19K levels.

Of course, ambient sentiment and data would influence the valuation, which we continue to assume will not fall below 14x forward. Factors in favour of this – inflation seems to have peaked, interest rates will head downward. If Congress does ok in the coming assembly elections, it will help.

Negatives – global macro scene, domestic fiscal deficit which could worsen due to things like food security bill etc.


One Response to “More upside than downside in Indian equities”

  1. […] Towards the end of Dec’11, we wrote that there was more upside than downside in the markets (See post ‘More upside than downside in Indian equities’) […]

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