In 2009, the Sensex has risen 81%, implying that 2009 could go down as the third best year for the Indian market over the last three decades. For the coming year returns would be modest from the Large Cap (Sensex). Their earnings expectations for SENSEX is - RS 1042 for FY 11 [Rs 1150 is Consensus - Read
http://www.dalalstreet.biz/investor/2010/04/india-revised-earnings-sensex-targets/ ]
Valuations are becoming expensive. However in conjunction with expected earnings growth they looks reasonable. We could see further earnings revision as a good support for the current valuations.
Though the gap has narrowed from the March peak, Nifty is still ~42% premium to Nifty junior This should provide a momentum to move away from Large Caps to Midcaps. While last year focus was on large caps, this year reward for stock picking should be high. As regards earning upgrades, Midcaps saw more upgrades than the large caps.
Fy11 a year of consolidation
– Recovery to be on track
– Corporate balance sheets have been repaired
– Valuations of large cap becoming expensive
– Large caps to give way to mid caps
– Stock picking to be rewarded going ahead in FY11
