The good news has
been priced in
We have been saying that the
better-than-expected earnings of the corporates and a pause by the
Federal Reserve (Fed) in hiking interest rates would be the key
drivers of the Sensex in the short term (see our market outlook
reports dated June 3, 2006 and August 2, 2006).
While both the factors have played out in favour of
the markets, we believe that the same have already been priced in
the valuations. The earnings of the corporates and the economic
growth numbers (tax collections, IIP etc) remain buoyant and high
cash levels of over Rs12,000 crore with the domestic mutual funds
should also support the market. However, we do not see too much
upside from here.
Our 12-month target of the Sensex at 12,000 would
give a return of only 6% from here on and this indicates that the
market is now close to being fully
valued.
