While money flow might keep the frontline stocks ticking, valuation-wise, it appears that the earnings of most large-caps are already discounted in their price, feel analysts.
MUMBAI: Dalal Street greeted the 9.4% GDP growth with optimism as the Nifty recorded another all-time closing high on Thursday. The numbers seem to have given a direction for the markets, which have been range-bound this week.
“The (GDP) numbers have raised the overall numbers for the year. The direction for the market is anyway good. It should continue to do well,” said Sachin Neema, head of research, India Infoline.
Dealers feel that, with the Sensex and Nifty peaking, the focus is likely to shift to smaller stocks now. While money flow might keep the frontline stocks ticking, valuation-wise, it appears that the earnings of most large-caps are already discounted in their price, feel analysts.
“The market is looking good and it’s going to be good for sometime. GDP growth has exceeded expectations. Growth will continue to be good driven primarily by small and midcap companies,” said Rajen Shah CIO, Angel Broking.
“Valuations of small and midcaps are very attractive at around 10 times,” feels Shah. “In comparison Chinese companies are overvalued at 27 times. If money flow continues, we should easily see an upside of 30-35% in the small and midcap companies.”
However, the big-ticket IPOs lined for later this month could be a cause for concern, feels Neema of India Infoline. “The market should continue to do well until mid June. But beyond that it is difficult to predict as the big ticket issues of DLF and ICICI Bank should suck out lots of money from the market. This may lead to a correction. It is difficult to predict at this stage,” he says.
India’s economy grew at the fastest pace in almost 20 years as companies lifted production to meet surging consumer demand. It expanded 9.4% in the year ended March 31, 2007, the biggest gain since 1989 and more than the government’s initial estimate of 9.2%, the Central Statistical Organisation said in New Delhi on Wednesday. Economists were expecting annual growth of 9%.
The strong showing in global markets also boosted the Sensex. Short-covering in derivatives ahead of expiry of May 2007 derivatives contracts helped. The index’ intraday high of 14573.81 is its highest since February 9, 2007. It surged 133.08 points or 0.92% to settle at 14,544.46.
Meanwhile the Nifty breached the 4300 level to touch at an all-time high of 4,306.75. It also closed at an all-time closing high of 4295.
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