BofA Merrill was the one of the first Research House which said that the SENSEX Earnings will be tapered to as low as Rs 1260 for FY 2014. Bofa Merrill’s estimates were in as early as April so that left ample time for investors like us sitting with 90% investments in Equities to Book Profits in the Rally but unfortunately we didn’t.
In the aftermath of the Massive Appreciation of USD against Indian Rupee and Decade Low GDP Growth Citi Analysts Questioned the Rationale behind India Quoting at 14 P/E on forward earnings when Bank’s Asset Quality is questionable as the Government Relaxed NPA reporting norms for Banks [U Turn from the earlier stance by incompetent Indian Government]. JP Morgan came and backed Citi’s theory that Indian Equities must trade Lower as well.
Bofa Merrill in a report released just a while ago says that SENSEX EPS will taper down to Rs 1260 as we move forward into the FY 2014. However, it maintains the market to trade between 18,500 to 20,500 and may inch lower if the Indian Rupee doesn’t stabilize. The report further says – The market is trading slightly below the long term average forward PE of 14.1x. However, at its low, the market tends to go to 10x whenever there is a global crisis. Given that the developed world is recovering, we are assuming current valuations for the international companies and 1SD below mean for the rest of the universe. Based on this we get a stress case multiple of ~11.5x on basis and an index level of 16,000 for the Sensex companies.
We are convinced beyond Doubt that the Sonia-Manmohan led Congress Government at the Center Paralyzed the Indian Economy for a whopping 4 years between 2009 and 2012 which uncovered massive scams unheard in Global History. WE do believe that SENSEX must hit 16,000 in the near future and Dirty Politicians and Bureaucrats in Indian Government be thought a lesson not to mess with the Foreign Institutional Money & USD. Again, a reminder that this is our opinion and you are free to make your own 🙂