Outlook for Indian Equities - A letter to Taran Marwah

Dear Mr Taran Marwah,

Good Evening.

I am an avid follower of the capital markets and keep myself abreast of all current developments either through the print media or the electronic media (primarily through NDTV PROFIT & CNBC-TV18). I am also
interested in reading articles on personal finance and investments in varied asset classes.

I have often read your e-mails with great interest whenever you post them online and have found them to be quite relevant and meaningful.

Coming back to equities, I have recently stumbled upon reviews by eminent analysts from HDFC Bank & Morgan Stanley who have predicted that the Sensex would touch 24,000 & 30,000 levels respectively within the next 12-18 months. I frankly fail to understand the rationale behind such optimism. Is this just a figment of their
imagination or are there any fundamentals/technicals to justify such high expectations?

My view is that the next few months would be a testing time for Indian equities and that expectations would have to be severely scaled down, keeping in mind the recent muted earnings of top organisations, continuous rate hikes by the RBI with more
rate hikes expected, inflation inching closer to 2 digits, squeeze on the margins of most companies across sectors, etc. Also, I recently came across a news report that within emerging economies, India was beginning to show signs of losing favour with global investors, who were now exploring better returns,particularly in Brazil, China, Mexico, etc.

Would appreciate if you could put forward your perspective on the outlook for Indian equities for FY 11-12 and what levels do you foreacast for the Sensex & Nifty by March'12.

Regards,
Sanil Sonalkar