Small investors will still invest

STREET TALK

Markets have been around these levels for a while now, and the fund flows into India in 2006 will remain robust. I don't see much upside to US interest rates. Even at these levels of the Sensex, small investors too will continue to invest.

This is because the fundamentals of the India story are intact and will only get better from here. One may not witness 40-50 per cent gains from the markets in the future, but there will not be any reversal either. There can be some short-term corrections, even as markets will continue to get re-rated upward in the medium to long term."

""UK Sinha,CEO & MD of UTI Mutual Fund

The start of better economy

It has been a great journey. The index was 100 in 1979 and has touched 10,000 now, an increase of 100-fold. It is for the first time the Sensex is reflecting the new found resurgence in the Indian economy. I am crossing my fingers, and this is just the beginning of better economic times for India."

""Ramesh Damani, market expert

FII flows will depend on fundamentals

We have indications to believe that fund flows will continue during the first quarter of this year. So long as the fundamentals of the Indian economy remain strong and corporate performance stays good, interest of FIIs will sustain.

The risks could arise from currency valuations, oil, US interest rates and possible event risks. We believe that interest rates will remain stable with a slightly upward bias. Small investors in equities tend to benefit with a disciplined approach, irrespective of index levels, and a market peak is not known until it is over.

It is difficult to predict index returns in the short term. The Sensex companies would see earnings growth of over 15 per cent in the next few years. But, returns in equities in 2006 will not be comparable to the supernormal returns accrued in 2005."

""Pankaj Razdan, MD, Prudential ICICI AMC

Investors must temper expectations

With the markets at these levels, it is important to manage investors' expectations properly. People must take a medium- to long-term view. Having breached the 10,000 mark, there could be some volatility in the near term. The market is not cheap any longer, though liquidity remains strong. However, investors must temper their expectations.

""Anup Maheshwari, CIO, HSBC Asset Management

Stage I of domestic inflows

I remember the day I started my career in the market. The index was 150. Then we saw 1,000 and now 10,000. One day we may reach 1,00,000. It is an historic day for every Indian. This is not the time to worry about bubbles at 16.5 times forward earnings. Investors should buy, but beware that markets can correct at any level.

I think we are entering the first stage of domestic inflows... the moment the domestic investors gain, they will invest more. I feel there is humungous amounts of domestic money to come.... Savings in the country by 2010 is projected to be $410 billion. Even if 10 per cent is to flow in, it will be more than $40 billion.

""Rakesh Jhunjhunwala, investor

Heady, but not unsustainable

These levels are definitely heady but not unsustainable. The market is comfortably underpinned in the short term, thanks to the significant amount of money still waiting to get into the country from abroad.

The nearly $1.5 billion raised by domestic mutual funds over the last few months will give significant domestic underpinning to the rally. Unless something untoward happens, we can easily see the market touching the 12,000-mark soon. Of course, some FIIs may choose to book profits but there are others waiting to get in.

""Dominic Price, MD & Sr Country Officer, JP Morgan India

Inflows to be decent

We don't expect FII flows to be constant but it will still be a net inflow this year "" probably around $5 billion without IPOs, unless there is a big change in global liquidity levels. We have met 120 Japanese investors and their problem is the supply of stock. Even if emerging market funds decided to be underweight on India, fund flows will be decent.

These funds will have to deploy some part of their allocation to India. The 12,000-mark is sustainable if we can raise our growth rate to 8-9 per cent since it will have an impact on corporate earnings. Performance of the agricultural sector and allowing FDI in retail are other factors which will help us move to higher GDP growth levels. Infrastructure development is also likely to have a multiplier effect on the economy.

""Andrew Holland, executive V-P, DSP Merrill Lynch

10,500 at the end of CY06

Based on our research, we expect the market to close at 10,500 by the end of this calendar year. But looking at the furious pace of the market, it looks like that the target may well be achieved in the next one month. New investors are more favourably inclined towards the market while those who have been invested for a while are a bit more cautious at this point.

""Susanta Mazumdar, director- research, UBS Warburg

Valuation reasonable

Keeping in mind the economic growth and the 15-20 per cent corporate earnings growth, the markets are valued reasonably well. The fund flows into the country in 2006 are likely to be slightly more than those in 2005.

Local mutual funds are also expected to invest substantially. The returns from equities in 2006 would be better than any other asset class, but one should tone down one's expectations a little. Going forward, the budget would be the immediate trigger. Apart from that, oil prices and the interest rates are other factors that one needs to watch.

""Narayan SA, managing director, Kotak Securities

It's more psycological

While it is a historic event, the Sensex hitting 10,000 has a more psycological rather than a fundamental impact. The markets were having a touch time breaking through. The fundamentals remain strong and the valuations are similar to those of other markets.

""Brian Brown, Citibank SSB