Wednesday, August 08, 2012

From 9,903 to 17,641!

After the euphoric bull run of 2009 it’s the stock pickers who will rock the market in 2010. Gyanendra Kumar Kashyap uncovers the front-runners and dark horses...

The Indian equity markets churned out one of the best annual returns (a whopping 76.35%) in 2009 – a reflection of investor confidence in the Indian economy’s resilience. Nonetheless, even after the euphoric rally, a number of questions remain over the market’s future course, most critically pertaining to the future course. After the unidirectional trends of the previous two years, 2010 is likely to usher in a period of volatility with the market moving in a broad trading range for the better part of the year. The bullish sentiment is likely to continue in 2010, only that it will be more selective than being broad based.

Mid and small cap indices are likely to outperform the key indices in 2010. Analysts expect about 12-15% gain for the key indices in 2010 from the current levels. However, the focus would gradually shift from macro driven unidirectional market moves to stock-specific investment opportunities based on earnings growth and absolute valuations. Given the current scenario wherein there are apprehensions regarding reversal of interest rate cycle led by spike in inflation, adverse impact of the withdrawal of the economic stimulus, the fears of further fiscal slippage and the sustainability test of global recovery; the markets could turn edgy in the first half of 2010.

The benchmark index, Sensex, is in a position of relative safety since it has retraced close to 70% of its prior downtrend making re-test of March lows (8,047 level) highly improbable. And if equity experts are to be believed, then 2010 is well poised to bear good returns. Moreover, the government is likely to mop up more than Rs.240 billion by divesting stakes in several state-owned companies and the primary route for this fund raising will be through initial public offers (IPOs). This will certainly provide the much needed fillip to the market rally in 2010. In fact, there are analysts who believe that if history can form any basis for future and if historic average internal rate of return of 17.25% per annum is maintained, then the Sensex can even reach astonishing levels of 1,00,000 by 2020. Although that’s quite pleasing, one would assume it’s an expectation more belligerent than required.

Like others, Dinesh Thakkar, CMD, Angel Broking, too is of the opinion that banking & infrastructure are the two sectors that will outperform in 2010. His reasoning is based on the pick in economic activity and high spends on infrastructure. Apart from infra, capital goods (as the investment cycle picks up with a lag in demand), media, retail and cement (a dark horse that could surprise positively amid pessimism) stocks could well surprise the investor fraternity in 2010. Clearly, if you have excess money, this is the place for you. If it’s a matter of your life’s savings, stay out!


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