The Duniyah Cricket Blog

This is the big question.  The Sensex is now at the quite amazing levels of 14,220, just a few months ago there were brokerage houses coming out with rosy predictions of the Sensex touching 30K. Well we seem to have some some semblance of reality now, but the question that comes to mind is - Are there any real bargains out there yet?

This is not an easy question to answer as there are still many question marks over the Indian market (see my last blog.) and with the last set of Inflation figures coming in at 11.5%, the economic uncertainties are not about to ease up. The GDP growth for 2009 now looks likely to be in region of 7.5% (a figure i would be happy with) , although if oil prices continue to climb we may see growth slow down even more and inflation climb even higher. At a P/E of 17 for the sensex, it could be argued that the market is still expensive relative to many other emerging markets. I would not be suprised if we see the Sensex at a P/E of 12 which is more realistic given the current climate - which would put the Index at closer to 10,000. That is still some 40% of current levels, I am not the only one to comment on those kind of levels - JP Morgan have put a target of 9,900 for the Sensex.

The bellweather of the Sensex - Reliance Industries seems to be one of the hardest hit and seems to be regularly flirting with the crucial Rs 2,000 mark. It has closed above 2,100 thanks to support from people looking for a bargain, but again this scrip I can see going a lot lower in the short term as FII’s exit India as the short term story gets less exciting and there is little money to be made as the bears tighten their grip. The other crucial scrip is Larsen and Toubro which is now close to 2,300 and there seems to be more downward pressure to come. L&T I would say is still expensive in the present market at a PE of around 20. What I like about L&T though is the exposure to the infrastructure space and the huge investment that will be happening in this space in the next few years. So this stock is bound to grow its earnings strongly, also coupled with upcoming listing of various units (next year 4 th quarter) and growing overseas business (in the Middle East expecially), this is potentially a great stock for the long term. That said however I really am not ready to plunge in yet and start building a position as I think I will be able to pick it up cheaper once this current cycle plays out.

I think once we hit the bottom, towards the end of the summer and the political uncertainties are brought to close with a general election we will see a fairly rapid bounce back in the markets with hopefully the bulls firmly in control next year. Especially as I think we will see oil pricess start to ease off towards the end of the summer as well (more on the oil issue in a seperate blog). But for not with the bears still stalking the Indian market, I am staying away, but watching and waiting in the wings for when the moment is right to strike…