1. Forecast GDP growth of 5.5% for the fiscal y/e 3/13 and 6.1% for the y/e 3/14;
2. EPS growth of 11-13%. New highs expected for SENSEX. Market drivers will include: falling inflation, trend of reducing interest rates, FII inflows, direction and level of the Rupee, global economy and politics, especially ahead of General Elections by May 2014;
3. Interest rate cuts to resume in Q1. If inflation is tamed (back to 5-6%) then cuts of up to 100 bp are possible from the current 8%;
4. Rupee expected to improve to Rs 52.50 vs $ by June;
5. IPOs, M&A and PE deals to revive on better sentiment
David Fuller's view India morphed from underperformance to a steady uptrend commencing with the upside weekly key reversal from just below 16,000 for the Sensex Index in early June. The catalyst was a bold move by Prime Minister Manmohan Singh and a few colleagues who were fed up with the dysfunctional coalition government and embarked on their own stimulative policies. Those who opposed resigned but no politican is likely to vote the Singh government down while it is succeeding. Here is one of several earlier comments on these developments.
This 10-year weekly chart provides more perspective in terms of what India can do when it is in fashion. Perceptions regarding the trend of governance are probably more important for sprawling India's stock market than in any other country. Consequently, India will frustrate and even terrify investors when governance is backsliding. The high reaction lows since June 2012, which I sometimes refer to as a step-sequence uptrend, indicate that bulls are still in charge and heading for a challenge of psychological resistance near 20,000 and the two previous highs.
Those are not insignificant barriers but the difference this time is a much higher base formation and valuations are considerably more attractive today than when the two previous highs were reached. A break in the 7-month and counting trend of higher reaction lows is required to check upward momentum beyond a brief pause and consolidation.