Super Mario has succeeded in calming the Global asset markets. By Undertaking to provide unlimited, very cheap liquidity to european banks, Mario Draghi has made sure there is enough appetite for junk euro government paper. This takes care of short term liquidity concerns for the euro area. US macro data provides further evidence to the fact that Ben bernanke has again turned around the US economy with several green shoots of recovery visible on the horizon.
In India, If Subbrao cuts CRR on 24th, i won't be surprised if there is a 5-10% further upmove...............he holds all the cards. In the absence of a functioning fiscal policy, the responsibility of reviving the economy and therefore the equity markets, lies completely with him
Thursday, January 19, 2012
Sunday, January 1, 2012
2012: The year of new Normals
We witnessed the second worst year for sensex since 1980. India also turned out to be the 2nd worst performing country in Asia Pacific Emerging markets in 2011s. This was a year when the resilience of the Indian economy got challenged by both internal and external factors.
However, bulk of the pain was self-inflicted. Correction in markets in the last quarter was more due to India Specific Issues like lack of policy measures, corruption and monetary tightening. GDP growth continues to come down. In foreign investors mind there was concerns about the mid-term direction this country is taking with increasing subsidies and populist measures.
We believe that going forward markets will reconcile to the fact that trend growth rate is coming down, and could settle at 6.5-7%. This could be the new normal for growth and is by global standards, not a bad number at all. We expect inflation would come down this year and could average around 7% leading to nominal growth of 13-14%. That would lead to corporate earnings growth of 15%.
Rupee has weakened significantly this wear and we expect 50 to be the new normal. Exporters will benefit big time from this rupee weakness.
We expect growth to bottom out in Q1 CY12 at 6%. Corporate earnings should also bottom out around this time. We expect RBI is to start easing monetary policy with a potential repo/rate action on 24th January itself. Going by history, equity markets bottom out around the time when interest rates peak out. We expect markets to bottom out in the Q1 itself.
Globally, things not as bad as perceived in August. In US, there is no double-dip. In Europe, Endgame will require ECB coming into play which we believe will happen sooner than later.
We Expect equity Market Returns of 20-25% backed by 10-15% earnings growth and a P/E rerating from 12 to 14-15 once growth bounces to 7%.
However, bulk of the pain was self-inflicted. Correction in markets in the last quarter was more due to India Specific Issues like lack of policy measures, corruption and monetary tightening. GDP growth continues to come down. In foreign investors mind there was concerns about the mid-term direction this country is taking with increasing subsidies and populist measures.
We believe that going forward markets will reconcile to the fact that trend growth rate is coming down, and could settle at 6.5-7%. This could be the new normal for growth and is by global standards, not a bad number at all. We expect inflation would come down this year and could average around 7% leading to nominal growth of 13-14%. That would lead to corporate earnings growth of 15%.
Rupee has weakened significantly this wear and we expect 50 to be the new normal. Exporters will benefit big time from this rupee weakness.
We expect growth to bottom out in Q1 CY12 at 6%. Corporate earnings should also bottom out around this time. We expect RBI is to start easing monetary policy with a potential repo/rate action on 24th January itself. Going by history, equity markets bottom out around the time when interest rates peak out. We expect markets to bottom out in the Q1 itself.
Globally, things not as bad as perceived in August. In US, there is no double-dip. In Europe, Endgame will require ECB coming into play which we believe will happen sooner than later.
We Expect equity Market Returns of 20-25% backed by 10-15% earnings growth and a P/E rerating from 12 to 14-15 once growth bounces to 7%.
Subscribe to:
Posts (Atom)