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Wednesday, July 29, 2009

Sensex Stock Index Target

Sensex Target Raised to 17,000, Credit Suisse Says

July 29 (Bloomberg) -- India's Bombay Stock Exchange Sensitive Index may rise to 17,000 by the middle of 2010, helped by the availability of capital, Credit Suisse Group AG said.

The target is higher than the brokerage's earlier forecast of 13,500, analysts Nilesh Jasani and Arya Sen said in a report. Still, they don't rule out a decline of 15 percent to 20 percent at the end of 2009 should the central bank tighten its monetary policy, before the index rebounds, the report added.

The Sensex yesterday slipped 0.3 percent to 15,331.94, trimming its rally this year to 59 percent. India is the world's fifth-best performer, helped by optimism that the election victory of the ruling Congress Party will allow Prime Minister Manmohan Singh to introduce reforms to stimulate economic growth.

"As the market turns more positive on future and return- on-equity projections are ratcheted up, we think earnings per share forecasts for fiscal 2011 could be raised by over 15 percent compared with the levels now," the analysts wrote. "At Sensex level of 17,000, the market may not appear as expensive one year hence."

Credit Suisse is raising its target for the Sensex following an upgrade to its estimates for regional stocks. The MSCI Asia excluding Japan Index may rise to 500 by July 2010 as earnings per share jump 30 percent next year, Credit Suisse strategist Sakthi Siva wrote in a July 27 research note.

The brokerage's Sensex forecast is lower than an April 2010 target of 18,000 set by Macquarie Group Ltd. earlier this month. Nomura Holdings Inc. estimated on June 26 that the Sensex will rise to 16,400 in the next 12 months.

Return on Equity

The "low cost of risk capital" should help Indian companies boost their return on equity to 21 percent in the fiscal year ending March 2011, compared with 18.5 percent currently, the Credit Suisse analysts said.

The Reserve Bank of India yesterday kept borrowing costs unchanged, signaling an end to its deepest round of interest- rate cuts on concern that inflation will "creep up" from October. The central bank raised its inflation forecast for the year to March 31 to around 5 percent from an April estimate of 4 percent and said it may soon need to "reverse" the loose monetary policy of the past ten months.

India's stocks may fall "only for a few months and rise again to higher levels as long as growth hopes are not shattered" in the event of a tightening in monetary policy, increase in interest rates, "reform disappointments or primary market equity issuance pressures or occasional regional and global market corrections or fiscal deficit worries," the analysts wrote.

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net





1 comment:

Jagruti Fadia said...

Thank you for your appreciation.

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