Sensex Levels Projected for 2010…21000 ? Nah ! Unless !?

Taking a Sensex Earnings base of 840 for the just concluded FY 09 and Growth rates of 5% ,10% and 15% for FY 10,the Sensex throws up a projected range from 8820 ( 5 % Earnings Growth and a 10 Multiple) to 17388 ( 15 % Earnings Growth and a 18 Multiple )

It is unlikely that with a very challenging global economic scenario impacting India too ,earnings growth rate would again cross 20% in the short term and markets again beginning to offer valuation multiples of 20 and over…the re-rating had reversed to de-rating…and now reversed back in a blink,with this Sensational Clear Election Results Mandate to the Congress !

In Extreme Frenzy and Irrational Exuberance Times however,the Sensex level may go much lower than 8000 or even cross 20000 as Momentum,Sentiment and Liquidity will reign supreme over Macro Valuations.

We may get to see a Sensex of 21000 again in 2009/10 only if

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  Earnings grow at a rate of 20% to 30% for FY 10 and we see an EPS of 1000 and a 21 Multiple or an EPS of 1100 and a Multiple of 19…Highly unlikely or


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  This Bullish Sentiment intensifies and the Market begins to look ahead at FY 11 EPS Levels this year itself and the Sensex offers a Forward 18 to 20 Multiple for an EPS of 1100 +…Hmmmmm !…Risk of Market running ahead of Fundamentals

Rational Sense dictates a Sensex Range of 12000 to 16000 for the next few months…The Congress led UPA government has got a clear mandate and It is clear that the Reforms Process will get a shot in the arm…Pro reform Announcements through the Budget in July and otherwise are the next big triggers awaited…Power,Agriculture,Infrastructure being in clear focus.

Chances of a Sub 10000 Sensex have LOW and it WILL probability NOT testing October 2008 and March 2009 lows.