Case For Bull Market

India started seeing inflow from 2003 and FED started raising interest rates from 2004 and that time only US funds were active and yet market started rising instead of falling. No slowdown happened and Indian cos reported Q to Q growth. In fact the GDP rose from 6 pc to 9 pc which by far the best in the world. Now even worst case scenerio the growth rate is forcasted @8.5 % down from 9 % .... just .5 % lower .The interest rate in US is as low as 3% and yet they are investors in India because the returns on equity in India is still projected far in excess of 20% and therefore question of withdrawal of funds from India is ruled out.

Japanese Funds had entered India bit late and some of hot money (H F) is already withdrawn and therefore even if the rate rises by quarter percentage no outflow will happen. Japanese Funds always have a 100-year vision and therefore one should not be really concerned about Japan. They think 100 times before entering but once enter try to stick with it. US economy is thanks to Japan's trade surplus and yet Japan did not withdraw from US markets even when US was not performing well.

Many new FII have have opened their shops in India. They has raised more than 8 bn USD to be invested in Index Funds and already started deploying the same. UK/US Funds too have started raising non Japan India dedicated Funds which is slated to come in India. More than 10 bn USD is being raised only for realty funds and another 10 bn USD is under serious entry into India

Markets are overly corrected in India as well as E M and currently trade at 14 X 09 PE and EPS of 1050(please note that 3000 points are embedded value in sensex.. For eg companies like Cairn India who does not have any income cannot be measured by PE ratio but the amount of asset it has ) which is neither expensive nor over valued. It is purely and grossly undervalued. Given the India growth story India is justified to have a PE of at least 20.

On fundamentals there is no political instability. Core reforms will continue and disinvestment reforms will be back in vengeance albeit with the approval of LEFT which will add fuel to the fire. Left as well as Govt is aware that they are not a position to go for mid term poll.

Agriculture is going great guns which will lift GDP to close to 9% by Dec or early Jan. Rural economy where Govt as well as India's major corporate like RIL, HLL and ITC are concentrating will have further rise is disposable income due to good monsoon and crop. Agricultural financing too spur the rural growth. The more than satisfying tax collections (50% higher in Q3) clearly suggest that fiscal slippage is unlikely to happen which the biggest positive for India, going forward. Govt has decided to speed up the infrastructure development by private and Govt participation which will go a long way to spur investments in India.

We should really learn to understand the difference between correction and reversal. Another 8 to 12 quarters India is going to give robust growth and capex cycle is on.

AND THE MOST IMPORTANT REASON :- DOW HAS ALWAYS UP DURING RECESSATION ...INFACT IT WAS UP BY 20% DURING 1945 WHICH WAS MARKED BY GREAT DEPRESSION