Experts rule out crash,advise caution

“I won’t see a 2008-like crash as the market is not as leveraged as it was then”. Shankar Sharma,although bearish over the long term,sees the market testing its previous highs. “The bad ending will happen after a strong pullback,during which the market could touch previous highs,” said Shankar Sharma,VC and joint MD of First Global.

But given that FII inflows largely give the directional cue for Indian markets,some fund managers are wary of negative global cues. Andrew Holland,head of investment advisory at Ambit Capital,believes the performance of the Indian markets,going forward,hinges entirely on global cues. “If global markets go down,which I think they will,then our markets will also correct,he said. Holland advises investors to adopt wait-and-watch approach.

Most experts perceive FII risk-aversion to be a major risk to Sensex performance.

“Only major risk for the Indian equities is if foreign investors turn risk-averse,” says Shah. Meanwhile,Holland is also not ruling out profit-taking by FIIs ahead of the year-end holiday season and also because of growing concerns in Europe and Korea.

For the year till date,Sensex is still up 10% with record $ 28.9 billion worth of net investments into equities by FIIs. While post-correction,the valuation levels have come down,it is still costlier in relative terms against its Asian peers. The index is trading at 15 times its 2012 earnings,which is equal to its historical earnings. Despite lower valuations against recent past,fund managers are wary given poor market sentiment. “At present levels,the market is not cheap,” says Agrawal. “I would still remain cautious on the markets.”

Interestingly,along with realty,banks and finance stocks,other sectors also took a beating,which according to some fund managers is worth looking at. Among the BSE 500 stocks,on Friday,a staggering 107 stocks or more 20% of them plunged to their 52-week low. BSE 500 has lost 13% since November 5. About 33 stocks on the index have plummet more than 25% since November 5,with some stocks,mostly related to the scam,losing 50% of market cap.