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News Analysis


19/04/2012
Let me start with a positive note saying `too much money too fast' chased the market beginning calendar 2012. Of course this allowed many investors and clients alike make decent money. However, the amount of exuberance, money flow and consistency of demand in Indian Equity market we had seen in Q1 2012 (since our last writing) has waned. More so, as per latest AMFI data, Indian Mutual Fund industry has recorded increasing number for closed folios on y-o-y basis for last three years with recent reduction of 1.6 million folios disappearing. MARKET PE CONTRACTION - What is most noticeable is that market PE has not moved materially from beginning of this (short-lived) rally in late January 2012 till today. The market PE expansion is not occurring due to absence of motivating corporate earnings which I am sure will reflect shortly in Q4 earnings season followed by Q1 of 2012-13 fiscal. Except for certain sectors, earnings are not going to charm the market and hence the Sensex. Keep in mind that many a times, market provides false positives and continues to go up for a while but fails to sustain due to lack of buyers. The fundamental reason for Sensex coming down is the inflated prices of constituent companies that are priced way beyond their respective earnings. It is the market PE that guides the index pricing only supported by underlying corporate earnings. WHAT IS NEXT? - Money Maker epitomizes premium research on Indian Equity market benefiting our clients early in time to stay up-to-date and proactive on their fund management and investment. Sensex move down just like this has occurred three times in past 25 months and this is the Fourth time. We bring an attention to our readers that it has accurately informed our clients each time on such occurrences. It addresses three aspects of market movement - market direction (which way?), damage quantum (how far?) and most importantly time factor (likely when?). Slowly, Sensex (and other indices) will settle lower (see inserted image) to rebalance the excess price not supported by current PE. Repeatedly we have informed to our readers and clients that level of 16,850 is very crucial for Sensex. From what market dynamics suggest, it is heading towards that level and may cross it. How much more damage it does beyond is to be known later on. HAPPY INVESTING! Mihir Sandesara - www.money-maker.co.in


Source : MySmartStocks.com