Reasons for a stock uptick in 2013:
1. Low valuations: Removing HUL and ITC, PE ratio of Sensex is closer to 10 than 15. Sensex as a whole also close to lower band of PER.
2. Good inflow of FII is expected due to QE4. FII which are long only will pick up lower valued floating stock. Short only FII will also buy stocks for quick returns
3. Moribund returns from real estate in GGN and Mumbai will turn incremental money into stocks
4. Most people with good salaries already into multiple real estate investments. They will turn incremental salaries into stock.
5. Sellers in stock emerged after 19000 sense-x. Most of the sellers are out of the market making it oversold.
6. Of the three main categories, individuals are out of the market. Domestic funds are fully invested. LIC and others are already sitting on cash generated at sensex 19000 and are unlikely to sell more. FII are fully deployed for 2012 and are likely to buy in 2013. So if FII are buying and individuals can only buy and cannot sell much, markets can only stay the same or go up.
7. I expect markets to go up till budget based on FII inflows at current weak Rupee and relatively strong dollar. FII will gain more in dollar terms as Rupee strengthens against the dollar.
8. I expect a "good" budget. Since conditions will go southwards very fast if a "bad" budget is placed, MMS and Chidu will deliver. Despite the populist parts, which will continue, conditions for business would improve - because government knows it has to happen.
9. I expect a feel good rally which will draw individuals into the market. In these oversold conditions, response in terms of rising Sensex due to incremental inflows from individuals will be sharp and quick.
10. Since individuals are out of the market for 4 years now and the people who burned their hands are out of the stock market, a new pool of people who will buy and have money to buy based on good real estate performance is in place.
11. Company results in Jan and April 2013 are likely to be better than expected, although not exceptionally good. THis will boost the confidence and also rerating based on improving PE ratio.
12. RBI easing is likely to be mild, probably just 0.25%. Still, this will translate into a feel good rally because the situation is condusive.
Conditions are therefore ripe for a good market. Hence my expectation of Sensex 25000 for the year.
A lot of other conditions I have decided to ignore because in my opinion, they are only distractors and will not influence the market. Balance of payment situation, inflation, continued high bond rates, poor tax collection and fiscal imbalances are amongst these ignored variables
1. Low valuations: Removing HUL and ITC, PE ratio of Sensex is closer to 10 than 15. Sensex as a whole also close to lower band of PER.
2. Good inflow of FII is expected due to QE4. FII which are long only will pick up lower valued floating stock. Short only FII will also buy stocks for quick returns
3. Moribund returns from real estate in GGN and Mumbai will turn incremental money into stocks
4. Most people with good salaries already into multiple real estate investments. They will turn incremental salaries into stock.
5. Sellers in stock emerged after 19000 sense-x. Most of the sellers are out of the market making it oversold.
6. Of the three main categories, individuals are out of the market. Domestic funds are fully invested. LIC and others are already sitting on cash generated at sensex 19000 and are unlikely to sell more. FII are fully deployed for 2012 and are likely to buy in 2013. So if FII are buying and individuals can only buy and cannot sell much, markets can only stay the same or go up.
7. I expect markets to go up till budget based on FII inflows at current weak Rupee and relatively strong dollar. FII will gain more in dollar terms as Rupee strengthens against the dollar.
8. I expect a "good" budget. Since conditions will go southwards very fast if a "bad" budget is placed, MMS and Chidu will deliver. Despite the populist parts, which will continue, conditions for business would improve - because government knows it has to happen.
9. I expect a feel good rally which will draw individuals into the market. In these oversold conditions, response in terms of rising Sensex due to incremental inflows from individuals will be sharp and quick.
10. Since individuals are out of the market for 4 years now and the people who burned their hands are out of the stock market, a new pool of people who will buy and have money to buy based on good real estate performance is in place.
11. Company results in Jan and April 2013 are likely to be better than expected, although not exceptionally good. THis will boost the confidence and also rerating based on improving PE ratio.
12. RBI easing is likely to be mild, probably just 0.25%. Still, this will translate into a feel good rally because the situation is condusive.
Conditions are therefore ripe for a good market. Hence my expectation of Sensex 25000 for the year.
A lot of other conditions I have decided to ignore because in my opinion, they are only distractors and will not influence the market. Balance of payment situation, inflation, continued high bond rates, poor tax collection and fiscal imbalances are amongst these ignored variables
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