Suresh Mahadevan, MD & Head, Equities, UBS Securities (India) has given vent to his mind on the likelihood of the sustenance of present rally and his free and frank opinion on the current rally in Nifty is as appended below:
For this rally to sustain we need to see a few things. First and foremost we need to see more proactive government, which we'll probably see post the election. The election result will be important in context how strong the government can be in terms of pushing the reforms. We need to see some level of fiscal discipline. The big picture in India is that it poses fantastic opportunity with its great demographic. But the government needs to do something about it. Attracting FDI, putting up low-tech manufacturing to employ all the people who are going to come into the work force. Then there are global events, which play a critical role. Whether we like it or not, India is a high beta market. Any global event which triggers a risk-off kind of a move will affect us. How do India's valuations look like right now? are still at about 12 times earnings. Even though we are expensive from December levels, we are still below our historical averages. The reality is that 2011-12 numbers are not going to be great and the market knows that. For 2012-13, we are expecting earnings per share (EPS) of Nifty companies to be about 400. Next year should be better in terms of earnings growth, we are looking at about 13 per cent earnings growth.
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