Market update

I expect market may move up because of short covering and mixed global cues we are getting this morning. Data from F&O segment shows that still there are substantial amount of shorts present in the market and any upmove from here may force them to cover their shorts which will lead to a more sharper and stronger rally. It would be great if we can end the day with atleast little bit of green on the screen. On Friday, Nifty retraced back sharply before touching or testing the previous low of 2896. This is good bullish sign for our market and it may lead to a rally upto 3250 levels initially. What will happen of June 29th is still not clear and any news which may suggest that Fed may pause the rate hike for the moment will cheer up the market and vice versa. As our market has been doing in recent past, our market will move more or less in tandem with the global emerging markets.

My personal opinion is that the valuations of some stocks have really reached mouth watering levels and they present a good amout of value like SREI,TII etc. But the only thing which needs to be seen is that whether we will see lower levels or not. I think one can start buying every dip from these levels and invest around 15-20% of their cash holdings. In any case most of the analysts don't see 9000 level broken on Sensex and on the upside people are predicting levels anywhere from 12000 to 13500 by year end. The risk reward ratio seems to the favorable at this point of time.

The prediction by Japanese fund Nomura of Sensex's fair value at 7000 levels is "RIDICULOUS". The expected earnings for the Sensex comapnies is around Rs 735 for FY07 and going by histotical data we should atleast give a P/E multiple of 12 to our market and it lead to 735 * 12 = 8850 .

Quote of the day :

"Our experience has been that pro-rata portions of trulyoutstanding businesses sometimes sell in the securities markets at very large discounts from the prices they would command in negotiated transactions involving entire companies.Consequently, bargains in business ownership, which simply are not available directly through corporate acquisition, can be obtained indirectly through stock ownership" --- Warren Buffet