Andrew Holland, chief executive officer, Equities, Ambit Capital, tells Krishna Merchant that positive global environment and the domestic growth story will pull the Sensex to 23,000 by March 2011. Edited excerpts:
Do you see the Sensex scaling new highs by Diwali?
The Sensex was stuck in a trading range. In the short term, we expect it to break out of the 15,000-18,000 band and touch 20,000 by Diwali on back of positive global environment. We have also given a target of 23,000 for Sensex by March 2011.
The US government will introduce stimulus packages in the next couple of months for job creation. In the long run, the US Federal Reserve will continue to buy debt securities and will bring down rates further. This will make companies more confident in terms of expansion.
In Europe, one should look out for Germany and France. Austerity programmes will ease off a bit in the next quarter. Due to low interest rates around the globe, liquidity will find its way into different assets. We also expect China to kickstart domestic consumption growth story in the later part of the calendar year.
However, we expect a minor correction around November/December due to profit-booking or any negative economic data.
Besides positive global cues, what are the other triggers that are expected to pull markets higher?
I would like to focus on FY12 earnings for India. India has back-ended 2010-11 earnings story. Once gross domestic product starts accelerating and operational gearing picks up, analysts will start upgrading earnings forecast. This will be across the board. If you look at FY12 earnings, markets are trading at a reasonable 14x PE multiple.
One stock that will lead the markets is Reliance Industries (RIL), which is consolidating at the moment. But, at some point, management will want to deliver value to shareholders. We have given a ‘buy’ call on RIL, with a target of '1,200 within the next one year on back of revaluation of assets.