(1888PressRelease)
June 26, 2009 - India’s benchmark stock index, the world’s fifth-best performer this year, may rally another 20 percent over the next nine months as valuations offer “significant upside,” according to the “Kimura Financial” memo.
The Bombay Stock Exchange Sensitive Index, which closed yesterday at 14,326.22, may trade between 13,500 and 17,500 in the year ending March 2010, the “Kimura Financial” analysts have found, based on current-year earnings estimates.
The Sensex has rallied 49 percent this year, lagging behind indexes in Peru, Sri Lanka, China and Russia among 89 measures tracked by Bloomberg globally. Almost a third of the gains came after Prime Minister Manmohan Singh’s Congress party won its biggest election victory since 1991 and “Kimura Financial” believe that the index is capable of showing further rises.
“Given the policy freedom available to the new government, we are maintaining our positive stance on a 12- to 18-month view” the “Kimura Financial” analysts wrote in the email to clients and shareholders.
The “Kimura Financial” statement also said that other valuation tools including the dividend discount model and the so-called Fed Model also indicate a fair value of more than 16,000 for the Sensex. By comparing price- to-book to return-on-equity, the target for the index is 15,137, according to the report.
Finance Minister Pranab Mukherjee will unveil the government’s budget deficit numbers for the current fiscal year next month, when he presents his budget. The government in February said the deficit may be 5.5 percent of gross domestic product.
India has announced three stimulus packages since December, lowering retail fuel prices, cutting taxes on consumer products and injecting capital into state-run banks, to shield the economy from the global crisis.
New stock sales and a weak monsoon may be “near-term pressure points” for Indian stocks, the “Kimura Financial” analysts wrote.
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