Six experts crystal gaze on the Indian stock market.
Ramesh Damani
Investment Advisor, Member-BSE
FY08 Sensex estimate: 12,000-15,500
The strategy of retail investors should be to avoid companies that diluted equity relentlessly. They must also avoid companies and sectors like automobiles and real estate that are sensitive to interest rate hikes.
They should look for value in the current market. Some sectors like mid-cap technology have become very attractive now. This is despite the announcement in the Budget that IT companies also have to pay the Minimum Alternate Tax. It will not have a significant impact and I believe that companies must pay taxes.
Investors can look to buy some good scrips in this market - ideally, look for companies that are debt-free. Markets are tired after a four-year bull run and this is a period of consolidation. This could turn out to be a longish correction but I believe that we have not yet seen the top of the bull market. I expect the Sensex EPS to be Rs 900-1,000 in March 2008.
Motilal Oswal
Chairman and Managing Director, Motilal Oswal Securities Limited
FY08 Sensex estimate: No projection
Considering the limited impact on the fundamentals and the positive long-term outlook, we recommend taking advantage of the sharp correction to buy stocks. Our top bets are Bharti Airtel, Reliance Communication, Maruti Udyog, ICICI Bank, Punjab National Bank, Infosys Technologies, Dr Reddy's, Grasim and SAIL. We are also upgrading our ratings for HDFC Bank, Satyam Computers, HCL Technologies and L&T from 'Neutral' to 'Buy' after the recent correction.
After the correction, we downgraded our Sensex EPS projection for March 2008 from Rs 835 to Rs 830. We are positive about the FMCG sector due to the thrust on agriculture and infrastructure. This will create jobs and also boost disposable incomes.
The macro initiatives for the sector focus on improving productivity and credit flow to rural areas. ITC, HLL, Nestle and Tata Tea would certainly gain from this.
Amitabh Chakroborthy
President, Equities, Religare Securities Limited
FY08 Sensex estimate: 16,100
The global sentiment has changed and international investors are becoming increasingly risk averse. Liquidity flows for emerging markets have been affected and their price earnings would be re-rated. However, this change in the sentiment of FIIs for India would be short-term.
In the long term, they would not be able to ignore our growth rate. The Budget will have a large impact only on the construction sector, which will now have to pay the Minimum Alternate Tax.
The tax would be levied on this sector retrospectively from the year 2000. They will have to make higher allocations towards tax reserves, and their future order book would also get affected.
A lot of new projects have been priced without taking this tax into account. But, otherwise, investors should look at the current fall in the markets as an opportunity to buy.
N Sethuram
Chief Investment Officer, SBI Mutual Fund
FY08 Sensex estimate: Difficult to give
The market is currently too volatile for retail investors to enter. If they do, they should be very careful as there is no certainty on how the markets will behave on a day-to-day basis at this point in time. They should read the storm warning for now: retail investors stay out of this market.
Sectors like construction have taken a real beating over the last few trading sessions. But one must remember that profitability is huge in the construction sector and it does not require punishment of this level.
The stocks from this sector will definitely bounce back and those who had bought them must sit tight and not panic and sell. The longer term fundamentals are strong, investors can exit later. Global factors are increasingly relevant in our markets now and these could decide their momentum and levels.
Nilesh Shah
Chief Investment Officer, Prudential ICICI
FY08 Sensex estimate: Don't have one
If there was a possibility of making money from the Indian equity market before the correction started two weeks ago, then there certainly is a possibility of making money from the market at the current levels.
While investors need to be careful with equities, there is no doubt that over a three-year period, the market will deliver positive and sound returns. Investors should certainly stay invested in this market.
However, whether you should buy or sell in this market should depend on how you want your asset allocation to look. If you are underweight on equities in your asset allocation, this is a good time to buy.
If you are overweight on equities, then you should move some money into debt. Selling decisions should be a factor of asset allocation and not market conditions.
A Balasubramanian
Chief Investment Officer, Birla Sunlife Mutual Fund
FY08 Sensex estimate: 15% higher than present level
The linkage between the Indian and global markets has increased, so we will have to learn to live with volatility. With the current trend of higher interest rates, this might be the time for retail investors to rejig their portfolio.
Liquid funds are returning 8 per cent and Fixed Maturity Plans will deliver 10.2 per cent this year. So, debt, as a product category, should not to be ignored.
Even bank fixed deposits that are offering 9.50 per cent returns have become very attractive. Investors must bring some of their funds into debt. However, the current volatility does not take away the attractiveness of equity. It will even out and the longer-term fundamentals are quite strong. (A Balasubramanian gave his Sensex projection on March 6, when it closed at 12,697.)