Sharekhan Valueline report for April 2006

Riding on liquidity
March of 2006 will be a historical month for the BSE Sensex. For the second time in its history, the Sensex overtook the Dow Jones Industrial Average (commonly known as DJIA) when it closed at 11,183.48 on March 29, 2006. Its ride was backed by strong inflows from the foreign institutional investors (FIIs) who pumped in $1.4 billion in the month. The domestic mutual funds too bought stocks worth Rs4,482 crore. The fundamental story just got better during the month with the consensus estimates for the earnings growth of the Sensex companies upgraded to 18.6% from (17.7%) and 11.6% from (9.8%) for FY2007 and FY2008 respectively. The Sensex is currently trading at 16.7x its FY2007E earnings per share (EPS), and 14.9x its FY2008E EPS. We believe that the Sensex’ valuations are no longer cheap but they don’t seem too stretched either.

Click here to download the report (pdf file – 1.4 mb)
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