July 8, 2009 : The stock market is likely to witness tough days in the next three months and the benchmark index Sensex may fall to 12,500 levels, financial services firm Religare said today..
The market is likely to correct in the next three months to come down to fair valuation levels. The Sensex can go down to 12,500 levels and the Nifty to 4,050 levels before they bounce back," Religare Capital Markets President Equity Amitabh Chakraborty told PTI.
The next three months will not be good for Indian stocks as a huge gap in valuations has been created in the market post the UPA victory in the general elections and it will now see a downside, Chakraborty said.
Marketmen said that the market surged in May on the general election outcome but had not been backed by fundamentals.
However, the Bombay Stock Exchange benchmark plunged by 870 points last Monday as the Union Budget failed to enthuse investor sentiment.
"The market was looking for a reason to book profit. Investors failed to comprehend the Budget as the expectations were very high," Chakraborty said.
The two key indices of the stock market had hit their upper circuit on May 18, with the BSE Sensex gaining 1,950 points to 14,284.21 and the NSE's Nifty rising to 4,323.15, up 600 points.
Remaining optimistic about the second half of the fiscal year, Chakraborty said that with valuations returning to realistic levels by October-December period this year Foreign Institutional Investors are likely to continue their investment at the cheaper valuations.
"A strong movement in the bourses can be seen in the second half of the fiscal year. The Sensex can reach up to 16,500 levels while the Nifty to 5,000 points by the end of 2009," Chakraborty noted.
So far this year, the Sensex has risen over 4,500 points or 47 per cent to 14,170.
After pulling out hefty amount from the domestic market in 2008, FIIs turned bullish on the Indian equity market and invested Rs 25,315 crore so far this year.
With ratings agencies like Moody's holding on to their grades for India, it is expected that FIIs would also focus on the country as valuations are attractive here, he said.
18,000 by April 2010
MUMBAI: The benchmark index Sensex will continue on its growth path and may even scale 18,000 level by 2010, experts say, notwithstanding the six per cent fall it saw on the day of the Union Budget.
According to a report by global research firm Macquarie, the six per cent fall in the Sensex was because of aggressive selling by investors after the Union Budget was presented, as the market became a victim of heightened expectations.
"We believe the markets have overreacted, and we maintain our positive stance on the market. We raise our April 2010 Sensex target to 18,000 from 15,000," Macquarie added.
Expressing a similar opinion, Citigroup Global Markets said, "We would expect the market to trade at 13,500-14,000 by December 2009. We continue to maintain a relatively defensive portfolio bias."
Meanwhile, domestic brokerage firm Angel Broking in a report said that the markets' reaction was a kind of a "knee-jerk reaction" but overall they are likely to remain positive.
"Keeping this in mind and considering that the stimulus packages and low interest rates will help unleash the huge latent domestic demand in India going forward, we remain positive on the Indian stockmarkets," Angel Broking said.
As far as Sensex valuations are concerned, the benchmark index is well poised to touch 18,000 level over the next 12 months, which would translate into a 25 per cent return from current levels for the Sensex, it said.
Near silence on issues such as divestment, FDI, deregulation, policy initiatives and a reform roadmap were a dampener for the equity markets. However, this does not mean that these issues are off the table as there is scope for policy action outside the Budget also.
"While divestments, FDI, among others are conspicuously absent from the budget, we are still hopeful that measures in these areas could be implemented by the various ministries in the coming months," Citigroup said.
"We think the market is looking for ... announcements in the wrong forum. The budget has limited itself (as it has for some years now) to issues pertaining to government finances, issues like fuel price reform and FDI liberalisation will be pursued on other forums," Macquarie said.