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Equity Outlook by HDFC AMC

March 24, 2009

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.

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