Dalal Street Investments

Fund Managers Views on Equity Valuations + Directions for Market

November 11, 2009

wealth managers indiaYesterday we covered Global Fund Managers views on the Indian Macro. Today we will cover directly on the equity markets, which is probably more interesting to you. Major drivers for Indian equity markets in FY10 would be liquidity flows and change in earnings.

A majority of the fund managers [65%] feel that the markets are fairly valued at the current levels. 20% rated Indian markets as Overvalued however, there are some other 15% who said that they are undervalued. BSE Midcap and BSE 100 were likely to give highest returns in FY10.

EPS Growth for INDEX:
Half of them expect it to be in the range of 5-10% while 31% expect it to be between 10-15% [Some divergent views coming here and hence this volatility of 2,000 to 3,000 points in near future] Of the Remaining, 8% less than 5% growth in EPS while the other 11% expect it to be greater than 15% [Morgan Stanley is in this quadrant. Read Full EPS Expectations Analysis here]

BSE Sensex Levels / Trading Range:
37% of the fund managers feel that the same would be in a range of 14000 – 16000. The weighted average for the fair value of the Sensex is around 16000. Around 27% expect it to be between 16,000 to 18,000 and another whopping 27% peg it between 18,000 to 20,000.

Nifty topline Growth:
The weighted average expected top line growth for companies in the Nifty for FY10was around6.59%in previous quarter which has been marginally increased7.88%.

For this quarter fund managers feel that Petrochemicals, OIL and Telecom Sector would be the laggards in terms of EPS growth. Overweight on Auto/Auto Ancillaries, Media and Pharmaceuticals. Neutral ones appears to be on Banking & Financials, Cement and FMCG.

Fund Flows:
The FII/FDI Inflows for FY10 would be higher than last year (FY09). MF fund flows for FY10 continues to be Positive.

Real Estate as an Investment Returns:
Majority of the fund managers feel that the same would be in a range of0-10%. Weighted Average expected return from Real Estate as an asset class in FY10 from the current level was around 6.82%in the previous quarter and has been increased to8.00% in this quarter

Indian Equities continue to be the most sought after Asset Class followed by Fixed Income securities and Gold ETFs.

Reduction in global risk appetite and slowdown in Indian GDP growth. Rising interest rates domestically and globally can weigh on the markets.


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