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K. V. Ramaswamy and Vijay S.
Choksi
Quadratic Financial Services Pvt. Ltd.
QUADRATIC VIEW:
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Sensex is in a consolidation stage and hovers around 14000 – 14800 for some
time. We believe the Sensex may touch 16500 – 17000 in the short term and then
on the back of oil developments either up or down, the Sensex would move in
the opposite direction. Support is very strong at 14000, 13800 and 13200 in
case oil rises to US$135. Resistance is available at 14800, 15200, and 16150
and finally at 17123 in case oil comes down
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The shorts in the system are yet to leave the system and they would keep the
Sensex depressed every time there is a uptick beyond 5% from current levels
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Technically, the Sensex would be range bound for the next 15 days between
13800 – 15200 and would break out of the range only if there is a very big
event or reform related development
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Fibonacci suggests a huge opportunity to invest but with a time horizon of
over a year to increase your investment by over 50%. Investors will again gain
and speculators will again lose and blame all except themselves. Sensex figure
seen is around 24000 in 18 months from here
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Some of the factors that will affect the markets are:
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OIL - @100 – Sensex at 17000, Oil@135- Sensex
at 13000
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Reforms – go ahead – Sensex at 16000, No
reforms – Sensex at current levels
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Sensex as on 31st July, 2008 – 14355.8 |
|
Year |
F.Y.
2007 |
F.Y.
2008 |
F.Y.
2009 |
F.Y.
2010 |
|
EPS |
718.5 |
839.9 |
1017.9 |
1316.5 |
|
Growth % |
37.30% |
16.90% |
21.20% |
29.30% |
|
PE |
20 |
17.1 |
14.1 |
10.9 |
|
RoE % |
23.8 |
21.4 |
20.3 |
21.8 |
|
P/B (x) |
5.1 |
3.7 |
2.9 |
2.4 |
|
Div
Yield % |
1.2 |
1.3 |
1.5 |
1.7 |
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Politics – to be ignored
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US Sub-prime issues – more to come out –
Sensex will be flat at current levels
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Banking NPA / Agricultural bad loans get worse
– Sensex at 12500
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In summary, Sensex will hover around 14200 levels and may go up to
16500(consensus) till Oct,08 unless there are some unexpected event risks that
arise in that period.
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April 09 to Dec 09 would be similarly bullish like 2007 was. Hence logically,
invest with a time horizon of over 18 months
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