UBS – March 2011 Sensex Target 20,000

The days of putting targets on BSE SENSEX are back. Despite the 100% rally from the bottom in Indian markets, fundamentals and liquidity are likely to support higher valuations. Indian stocks are likely to re-rate further over the medium term as positive data points relating.

The earnings estimates for the Sensex indicates 4% growth in FY10, 22% growth in FY11 and 21% growth in FY12. It is estimated that, strong earnings growth for pharma, cement and petrochem companies in FY10 while real estate and metals companies are likely to post strong earnings growth in FY11.

UBS BSE Sensex EPS estimates are – FY10E 907, FY11E 1110, FY12E 1343. FY2011 will fully capture the economic recovery and corporate earnings, UBS set a March 2011 target of 20,000 based on a P/E multiple of 14.9x FY12 earnings. Sensex is trading at a forward PE of 15.9x and forward P/BV of 2.6x.

However, the BULLS are in a mood to go merry and are likely to touch the March-2011 UBS estimated figure of 20,000 12 months ahead in March-2010 or even earlier, who knows:-) The Mad mad Bull Market is here.