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Too high, too soon: market players are concerned

business Updated: Sep 30, 2009 21:20 IST

Market players seem unanimous on the fact that Sensex at 17,000 has crossed its fundamentals and suggest that a correction lies ahead.

While the total FII inflow into the equity market since March 2009 stands at Rs 64,767 crore, almost 30 per cent or Rs 18,344 crore came in September alone. Experts suggest that redemption pressure on hedge funds will lead to correction.

“Buried under redemption pressure last year, hedge funds took a moratorium period of one year and hence redemptions on hedge funds are expected now,” said Amitabh Chakraborty, president equity, Religare Enterprises. “ I expect corrections to the tune of 10 per cent towards the end of October.”

Apart from FII inflows and strong advance tax numbers, the market is upbeat about corporate expectations in the second quarter that ended on Wednesday.

But there is a flip side. “Any company that disappoints the markets expectation on results will lead to a correction,” said Manish Sonthalia, portfolio manager, Motilal Oswal Financial Services.

“The market is not cheap by any yardstick,” said Sudip Bandyopadhyay, managing director, Reliance Money. The price to earnings (PE) multiple at 22.2 times is almost as high as it was the last time when it touched 17,000. “Short-covering and profit-booking may lead to some correction.”