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Market Watch | Playing Twenty20

With Sensex at such a historic milestone, I thought it would be nice to get back to the basics and think of 20 reasons to continue to be bullish on the Indian market, writes Udayan Mukherjee.
Hindustan Times | By Udayan Mukherjee
UPDATED ON OCT 29, 2007 11:00 PM IST

Several emotions pass through your mind with the Sensex at 20,000. At such a historic milestone, instead of even attempting to predict where this market could eventually go, I thought it would be nice to get back to the basics and think of 20 reasons to continue to be bullish on the Indian market.

1) GDP growth visibility of 9 per cent plus for the next five years. The basic underpinning of this bull market.

2) The sterling job that the RBI is doing of stewarding/managing this growth to avoid any blowouts. We need a long innings.

3) No immediately apparent reason why our economic growth story will be derailed suddenly.

4) Superb delivery from India Inc should continue to deliver 15-20 per cent plus earnings growth through the next 3-4 years.

5) Arguably the best entrepreneurs in the world running superb mid-cap companies makes India a stock picker’s delight.

6) Easy capital availability, Indian companies embarking on large capex programmes to ensure future growth visibility.

7) New sectors like real estate emerging in the listed space, expanding overall market cap and investment options.

8) Politics ceases to be a major threat, all central political clusters think more or less alike on economic roadmap.

9) Interest rates seem to have topped out, removing a major potential threat for equities. Rates should start easing in 2008.

10) Global emerging markets poised for significant outperformance, India fits in perfectly in that big picture.

11) India has lowest correlation with the US economy, best hedge against any recession in the US.

12) Perhaps the most robust domestic consumption story in the world, which makes it one of the safest markets to be in.

13) Valuations are not cheap but nowhere near being ridiculously expensive. Still room for re-rating.

14) Indian stocks have huge value embedded in their unlisted subsidiaries; hence valuations are cheaper than they appear.

15) India is just being discovered by global money managers as an asset class, huge capital flows to come in the next few years.

16) Fair amount of scepticism abounds about India; investors have been left out, great base for continued outperformance.

17) There is no mass hysteria about stocks, public participation is limited; no classic signs of a top.

18) Indian households extremely underweight on equities, this will change over time and the transition will fuel stock prices.

19) With much stronger regulation, chances of a stock scam ending this bull run are much lower than earlier years.

20) The appeal of the India story can easily lead to a complete mania amongst global investors and prices can reach irrationally high levels.

Listed above are not twenty reasons to buy futures contracts but to own a slice of Indian equities over the next many years. As they say in the ads, enjoy responsibly.

(The writer is Executive Editor, CNBC-TV 18)

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