Is The Sensex Dipping To 12K A Possibility?

Backdrop: A more than 8 per cent drop in the market over just ten trading sessions has set off concerns about a slide again

Hinges On Global Conditions

The prospects of the Sensex going back to 12,000 levels are remote. It may happen only if, internationally, the economic conditions deteriorate again and there is double-dip recession globally. Fundamentally, the domestic economy has picked up pace and this is reflected in the latest assessment of the RBI, which has pegged FY10 GDP growth at 7.5 per cent. The high investment rate should hold it in good stead and government stimulus is expected to be withdrawn only in tandem with economic growth. This growth should percolate to corporate profits, leading to higher growth in FY11 over that in FY10. Valuations based on FY11 consensus earnings are not demanding. Globally, India and China are seen as preferred investment destinations on account of strong domestic demand and relatively higher growth rates. These factors are expected to attract money into the markets over the medium term.

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Andrew Holland
CEO

Ambit Capital

No Possibility At All

I do not think the Sensex at 12k as a possibility at all. Because, firstly, I don’t see a repeat of the disastrous times of 2008. The financial authorities across the globe have restored liquidity through stimulus packages to prop up their economies. Even though central banks are thinking of withdrawing the accommodative stance, they will be mindful of the growth path, especially in the emerging markets. I am particularly confident about India, as it has reasonable GDP growth prospects of 7.5 per cent in FY11 and 8.5 per cent in FY12. This is commendable, as compared to the 3-4 per cent growth in developed economies. Secondly, I believe that in the forthcoming year we will see accelerating growth rates transfer into incremental revenues for Indian companies, thus expanding bottom lines. In the following year, we expect a 20-30 per cent upwards revision in the India earnings story that will reflect in Sensex earnings as well.

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Market Voices

The mainland authorities have launched different measures to prevent the economy from overheating and asset bubbles forming. This is a good thing as it will help the mainland’s growth to stabilise and a stable environment there is definitely beneficial to Hong Kong.

Norman Chan, Hong Kong Monetary Authority chief executive Norman Chan said in a briefing to the city’s legislative council.

I don’t see a slowdown in lending as a bad thing. It moderates risk to some degree because people don’t go overboard.

Mark Mobius, Chairman of Templeton Asset Management, who oversees about $34 billion in emerging markets funds, said in an interview at a conference in Sydney that China’s lending slowdown may benefit the domestic economy.

In the long term, we cannot have sustainable and durable economic growth without getting our fiscal house in order.

Barack Obama, US President in his introductory remarks to the White House’s fiscal 2011 budget warned that the US must tackle its mountain of debt to ensure sustainable growth.

The government and the Bank of Japan are dealing with deflation with their own tools, while sharing the same policy direction. The government should not mention specific monetary policy measures.

Naoto Kan, Japan Finance Minister said the government and the BOJ would continue to cooperate, but refrained from saying what specific steps the Bank of Japan should take