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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

India's Sensex Index tumbles by nearly 10% from highs, a buying opportunity ?

Stock-Markets / Analysis & Strategy Dec 13, 2006 - 12:35 AM GMT

By: Nadeem_Walayat

Stock-Markets

The indian stock market has stormed ahead to new highs , after recovering from the dip during the summer. The market finally paused for breadth as profit taking took the index about 10% lower. The Banking sector led the decline in Bombay including sharp falls in ICICI Bank and HDFC Bank, which was a result of the Reserve Bank of India's decision to tighten liquidity by raising the cash reserve ratio of Banks.


Further downside is likely in the banking and technology sector to unwind the overbought state in the index. Though india is still a long-term buy so the decline should represent an ideal buying opportunity once the market makes a base.

The Sensex chart is initially targeting a move to the previous peak of 12,600 which is likely to be broken to further target a 50% retracement of the advance from the June 06 low, at 11,300. This would represent a further drop of some 13% off current prices. Which if it were to occur would represent a good buying opportunity, as the market at 14,000 traded on a PE of 19 , thought not overly expensive given continuing strong profits growth of some 25 to 30%.

How to buy into India's growth for the long-term
There are numerous investment trusts, mutual funds and unit trusts that invest in the india stock market, with funds seeming to be launched every other week. One notable good performer that comes to mind is the JP Morgan Indian Investment trust.


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Comments


14 Dec 06, 02:05
India will overtake China next year as the world’s fastest-growing economy
on rising consumer and government spending, Credit Suisse raised its 2007 growth forecast for India's $775 billion economy, Asia's fourth biggest, to 10% from 8.5%, Mr Tao said. China’s $2.2 trillion economy is expected to grow 9.9% next year from 10.4% in 2006, he said.

Surpassing China’s expansion rate for the first time at least two decades may help lure the overseas investment India needs to replace dilapidated port and roads and create manufacturing jobs. Prime Minister Manmohan Singh needs rapid growth to lift 350 million people out of poverty in the world's second-most populous nation.

“India's growth story will only get stronger,” said DH Pai Panandiker, president at RPG Foundation, an economic policy group in New Delhi. “There is a lot of money available to spend in India.” Sensex, which has risen 38% this year, touched a record on December 7 as overseas funds bought a net $8.52 billion of stocks after having invested a record $10.7 billion in 2005.

Per capita income in India has doubled in the last nine years and the number of households earning an annual income of at least $10,000 is rising more than 20% a year, according to McKinsey. Commercial banks’ outstanding loans have doubled in the past three years and have risen more than 30% since April 1.

India had the highest average salary increase in the Asia-Pacific region in 2006 gaining 13.8% in 2006 compared with 14.1% gain in 2005, according to human resources consulting firm Hewitt Associates. Salaries in India may rise by 12.3% to 15% in 2007.

shashi
13 Mar 08, 05:05
regarding economic growth of india compared to china

it is only in words not in reality,due to corruption.


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