Notes on Indian equities, sectors and economy

How low can the market go in FY13?

Posted by fairval on March 26, 2012

Currently the market is trading at about 17x foward,  above its 20 year median level. It clearly needs to come down to the median level, there is nothing happening to suggest the market should trade above long term median range.


The bunched up negatives tends to suggest it should go below the median. How low can the markets go? In the worst case scenario, Sensex tends to down to about 11x forward. Things arent that bad yet.

The local situation has a few positives, the main one being that interest rates which have peaked out. The RBI will not raise them anymore, but may not be able to cut much either. A 50-100 bp drop by Mar’13 is not likely to kickstart demand, either consumer or industrial.

Negatives are several – fiscal deficit will slip further, tax hikes and petro price hikes will spur inflation, the UPA govt has lost credibility..The opposition is doing no better, so we are likely to have a hung parliament in the next elections, so more drift and decay likely.

There is a real danger that both FDI and FII flows may ignore India over the next 2-3 years, or atleast the remaining part of 2012.


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