The short answer, as usual is I do not know.

Even worse, I do not know anybody who knows anybody who knows anybody who has the answer….so here is an attempt at guessing.

At the end of a 25% ride for a year…the market could pause for breath, right?

The market is already ahead of itself in terms of PE. The earnings will have to grow..and I do not see that happening before September at best and December at worst.

So what will the market do?

Well that is very difficult to say. Depends on the strength of its legs. The Sensex itself has Tcs, Infosys, etc. which is likely to benefit from the US recovery. The performance of these shares has nothing to do with the Indian economy. As one sees the salary increase in Infosys, it is clear that they are not worried about staff attrition. Nice.

Oil which has a role – so Ongc, Reliance, and the OMCs are not likely to give some outstanding ‘pull effect’ to the index. ITC has been and will continue to struggle with the government’s onlsaught.

There are not enough FMCG companies (current market favorite), which means the lead has to be taken by the finance companies. Axis, Icici, Hdfc, Hdfc bank, Sbi, Kotak, Power finance, etc. – are all likely to be a little tired after their long run of FY 2014-5. The NPA in the PSU BANKS is well documented, I am worried about the NPA in the private sector banks. I can assure you that is HUGE.

That leaves you with very little visibility of the Sensex PE. Anyway I am not  a big sensex fan in terms of seeing where the market will go. The non sensex companies could give good returns and I am not talking about them.

Now turn to bonds. All over the world the interest rates are down..and India is the Island of 8% Gilt yields. Even if you discount it for inflation at 6% it leaves you with a real yield of about 2%. THIS IS NOT BAD AT ALL.

So you will see more money coming into the bond market – as shown by Rbi figures over the past 18 months (what do you think held the Rupee at 61 to the US $? Why is the FII investing in India ?

For long term good yield (our brilliant bankers ‘protect’ the currency ratio), stable rates, and the immediate capital gains when RBI reduces the interest rates.

At least to the couple of FIIs that I spoke to the short term bond returns (one year) looks better than the sensex returns. This is not to say that they will be right, because the following could happen:
– interest rates in the US cold go up – so some of the short term money could run away.
– some infra projects could attract a disproportionately large equity and debt inflows.
– money running away could hit the rupee vulnerable (making currency losses to offset the capital gains)
– the second rung (BBB+) could raise money abroad (bringing interest rates down too fast),

It is difficult to predict, especially if it is about the future.

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  1. whatever is the level i will keep on investing as india is the market for future.once can see in a Bank advertisement “Rent to paraya hota hey EMI start karo” when partying with friends.
    its better to invest in bank shares as compared to buying property.

  2. Yogesh Sunaram, cfa, on FB:

    Good one! … one should actually start looking at the recent bull market cycle from Aug 28,2013, about 19 months ago, when all indices in India bottomed out and the level on the NIFTY was 5285. Since then, the NIFTY Index has rallied 63%, and about 290 stocks (almost 50% of the stocks in the Reuters India index of 588 stocks) have doubled and some have quadrupled. So if you go by anecdotal evidence, bull market cycles on average last for 4 years ( which includes the consolidation period) , then empirical evidence suggests that indices would more likely pause and consolidate this year and if the broad economic recovery happens in the next 12 to 15 months and if the global markets stay healthy at that point in time, we could have another leg of the rally starting in mid 2016. But as Galbraith pointed out : ” There are only two kinds of forecasters in the financial markets – “those who don’t know and those who don’t know they don’t know. “

  3. >>It is difficult to predict, especially if it is about the future.
    And the whole article is about predictions.Wow.

  4. +ves for the market

    1. Lower oil prices
    2. Lower interest rates
    3. Increasing govt. infra spend – roads, power, ports, smart cities, etc.
    4. Easing taxes, doing business over the long term
    5. Better infrastructure as projects get complete
    6. GST
    7. Increasing Disinvestment/Lower subsidy

    -ves for market

    1. Politics/Terrorism – NaMo not in power..
    2. External factors – EU, China, Japan, US, etc.
    3. Govt’s inability to implement plans

  5. sethuraman,
    What if i say, “why do some morons call themselves sethurman”?
    Note that I did not make any personal comments.
    I just posted what i felt after reading the article.

  6. mr.Buffet (as you call yourself so, god knows what way you are in line with the genius).
    Don’t keep on highlighting negativity. Your language and expression says that you feel, only yourself tooooo smart.
    Let others learn by what mr.Subra says and think for themselves to arrive at conclusions.

  7. >>(as you call yourself so, god knows what way you are in line with the genius).
    Ganesh, Same applies to you.
    >>Don’t keep on highlighting negativity. Your language and expression says that you feel, only yourself tooooo smart.
    Pls point out where did i highlight negativity? That was just an honest comment. I think Subra sir himself would not have found it offending.

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