Here is the outlook for Equity by HDFC’s CIO and Sr. Fund Manager Mr. Jain.
Current valuations are cheap even assuming NIL earnings growth in FY10. Sensex FY09e EPS-Rs.876, FY10e EPS-885. Equities on current yield are cheaper than bonds – Equities yield: 10.0%, Bond Yield: 6.5%. This points to extreme pessimism and significant under valuation.
Fall in oil price has reduced risks for India and has improved longer term economic outlook. Over next 3 years, potentially, HDFC AMC expects approximately 30% earnings growth (assuming nil growth in FY10 and 15% CAGR thereafter) which will lead to approximately 50-80% P/E expansion.
How Small Investors Lose Money ?
According to AMFI data, Equity Investments in Mutual Funds FY 2008 at the Peak was INR +49,360 cr. Between October – January 2009 Bottoming INR -1,072 cr. So they have invested at the Peak and Exited at the Bottom 🙂
Isn’t it easy to say BUY Cheap and SELL HIGH ? Then why aren’t you guys BUYING cheap now ? At least small amounts of SIP.