2009 Outlook for Nifty/Sensex

Tuesday, October 21, 2008

India beat Australia by 320 runs in the second test...the outlook is for better in 2009.

Game 6 of World Chess championship Anand-Kramnik tonight; Anand is +2

On a more sombre note, current Sensex EPS is about Rs 825 per share and Rs 250 for Nifty. It would be hard to argue for growth beyond these figures given the amount of investment at the peak in Land, buildings and foreign acquisitions. Further, the middle class consumer in India will retrench somewhat given the hit to their mutual fund holdings and headlines about job losses.

My outlook for 2010 is a 10% reduction in EPS to about Rs 750 per share Sensex and Rs 225 per share Nifty.

The liquid market has transmitted a clear message to promoter groups to clean up the balance sheets and remove uncertainty. Sooner or later, the red ink will have to be reported. Unlike past episodes, foreign investors will take a long time to recover from their domestic disasters, and even longer to value new investments. The groups that leave uncertainty on their balance sheets will end up last in line in this 'new risk averse/aware world'.

At the projected EPS outlooks and a generous multiple of 11, we have the following:

Sensex: 8,250 Nifty: 2,475


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