Indian Economy Back to 1995-2003 Years + Thank Congress & Manmohan Singh
August 20, 2013
FII Mover & Shaker of Indian Market, Citigroup Equity Research has set the undertone of to be Bearish on India. Citi says that India has gone back to its old normal (FY95-03): lower growth, higher uncertainty and yes, lower market multiples
The macro-economic levels: be it its fiscal deficit, which it reduced from 6%+ to under 3% over the 2003-08 period; inflation – which it sustainably reduced to sub 5% in the 2001-03 period; and its currency, which appreciated almost 25% (Rs49 to sub Rs40) over 2001-07. These no doubt were very strong growth years, boosted by global capital, but there was method and direction from the policy makers. Can this be done again?
India’s ‘new normal’ valuations will likely be its old, 1995-2003, valuation averages which is about 12.5X Fwd P/E multiple as you sync your growth and macro parameters with that period you should also align the multiples.
All of India’s markets (Rates/FX/Equity) have hit lows. India has been a laggard among weak EM peers, and this has raised the risks of a market-induced spiral even from here They have Set Market Target; 12.5x 1 Yr fwd earnings, or a Sensex target of 18,900 (+3%).
[In our opinion Sensex target will likely get revised downwards as earnings slide in the coming quarters. EPS Estimates for FY2014 realistically will be 1275 and 12.5x will give us the magic number for SENSEX at 16,000]
We should Thank the Corrupt and Scandalous Congress Government led by Dr Manmohan Singh for F****ing the Economy which is impossible to be repaired in the near term.