Is the Sensex dipping to 12k a possibility?

Hinges on global conditions

Theprospects of the Sensex going back to 12,000 levels are remote. It may happen only if, internationally, the economic conditions deteriorate again and there is double-dip recession globally. Flindamentally, the domestic economy has picked up pace and this is reflected in the latest assessment of the RBI, which has pegged FY10 GDP growth at 7.5 per cent. The high investment rate should hold it in good stead and government stimulus is expected to be withdrawn only in tandem with economic growth. This growth should percolate to corporate profits, leading to higher growth in FY11 over that in FY10. Valuations based on FY11 consensus earnings are not demanding. Globally, India and China are seen as preferred investment destinations on account of strong domestic demand and relatively higher growth rates. These factors are expected to attract money into the markets over the medium term.

No possibility at all
Firstly, I don’t see a repeat of the disastrous times of 2008. The financial authorities across the globe have restored liquidity through stimulus packages to prop up their economies. Even though central banks are thinking of withdrawing the accommodative stance, they will be mindful of the growth path, especially in the emerging markets. I am particularly confident about India, as it has reasonable GDP growth prospects of 7.5 per cent in FY11 and 8.5 per cent in FY12. This is commendable, as compared to the 3-4 per cent growth in developed economies. Secondly, I believe that in the forthcoming year we will see accelerating growth rates transfer into incremental revenues for Indian companies, thus expanding bottom lines. In the following year, we expect a 20-30 per cent upwards revision in the India earnings story that will reflect in Sensex earnings as well.  -  CEO Ambit Capital

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