SHORT NOTES ON MARKET

The year 2009 unfolded with 'The Satyam fiasco', the biggest Indian corporate scam. It taught us not to put blind-faith in a visionary looking management and glittering financials reported by them. After all, 'all that glitters is not gold.' Moreover, this year reiterated the significance of a stable and reform friendly government. UPA's landmark victory in the elections left the markets with a jump of over 5% in a single day. The year also brought investors who had an eye for value - gains that were more than 4 times their investment, with very little risk! Yes, it immensely rewarded the genuine long term value seekers. At the same time, it did not disappoint those who had chosen to play it safe by investing in sound blue-chip companies when their valuations had taken a blow in 2008.

The heavy weights of BSE-Sensex had a complete turnaround of sorts in 2009. From the YoY fall of around 49% registered in the month of February-2009, the Sensex witnessed a YOY surge of 86% in November, 2009. The state of panic in 2008 gave way to euphoria in 2009 as most large Indian companies emerged successful in battling the global downturn better than their Western peers. In the bargain, they evoked interest of domestic as well as foreign investors.

But please do not perceive us as a seer of the doomsday. We are definitely not. All said and done, we reiterate our confidence in the Indian businesses for they are in a much better position than most of the global peers. We continue to have full faith in the growth prospects of most Indian heavyweights. The longer term fundamentals are still heavily in favour of investors.

However, the current valuations are a tad expensive with respect to the medium term fundamentals. So, we insist that investors exercise greater degree of caution.

We must keep a close watch on macro factors like GDP growth, inflation, commodity prices and government policy initiatives as also micro factors like demand-supply and pricing environment for individual companies.

With this in mind, we welcome the exciting year of 2010 with a lot of optimism and a little caution.


sOURCE:EQUITYMASTER.