Its really interesting to predict markets for most analysts. I find them strange, because most of these TV analysts aren't really accountable for what they say. But I must say, this time on, they seem to be right in their view that the markets seem bullish. Here's why I think so!
Look at the below table showing PE, P/BV and Dividend yield for Sensex over the years. Every time Sensex has reached a PE of 20+, there has been a correction(logically so!). What surprised me and got me wrong was that Sensex did reasonably well in 2012 though indicators weren't bullish. At this point, I see a good story emerging for the short term(1-2 years). One, Dividend yield for Sensex stocks is at one of the best we are seeing for the last 7 years at 1.53. Secondly, PE is just around the levels we saw in 2005. As most analysts, I would say PE is not the sole indicator of bullishness. However, for now, this looks attractive for a 15% return.
Manufacturing and some of the banks which haven't done well over the past year interest me at this point. Stay off IT stocks though they may run with market sentiment. I for one, don't want to participate in their fiscal management story which are seemingly less bullish. Look at the top line of top IT companies over the years, we are no where near to what we saw during the IT boom. Why should these companies command a PE of 15+? Is there any logic?
I will separately post some of the stock ideas for the year shortly.
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