One of the noted analysts, Dipan Shah said about the future prospects of Indian markets. He expects the global, and consequently, the Indian markets to remain volatile at least in the near-term. There is uncertainty over the recovery in developed economies like Europe.
On the other hand, China's measures to curb the growth rate and potential asset bubbles also lend uncertainty to the global economic scenario. On the domestic side, we have to get more comfort on monsoons and on inflation/interest rates.
With more clarity on the above-mentioned factors and on FY11 earnings, we expect markets (Sensex) to steadily move up to 19,000-20,000 levels by December 2010.
The triggers for the markets to move up from the current levels are a good monsoon and stability in the global economy. These factors will likely lead to increased fund flows into the markets.
The future of Indian stock market is heavily dependent on the following three parameters:
*Future growth of the Indian economy, annual inflation, and productivity related improvements;
*The inflow and outflow of foreign institutional investment;
*Any movement of price-earnings ratios.
Alok Aggarwal, another analyst says that the Indian stock market, which was grossly overvalued two years ago, is now more reasonably valued, thanks to India's continued economic growth.
According to him, three groups of industry verticals which together dictate the Indian stock markets will be responsible for this growth.
Group 1: Retail, travel and hospitality (e.g., airlines, hotels, theme parks), financial services, healthcare (including medical tourism, alternative medicinal centers and spas, hospitals, pharmacies, and laboratories), entertainment (including the Indian movie and TV industries), and private education.
This group is expected to grow at an annual rate of 21-22% per year.
Group 2: Hi-tech services and products like information technology and application development, business process outsourcing, knowledge process outsourcing, drug research and clinical research outsourcing, engineering services outsourcing, software and solutions related to the consumer Internet, software as a service, open source, software-cum-services, and telecommunications (both wireless and wire-line).
This group is expected to grow at an annual rate of 17-18% annually.
Group 3: Automobiles, automotive components, electrical and electronic components, specialty chemicals, pharmaceuticals, gems and jewelry, textiles, and sectors related to construction, real estate, and infrastructure.
This group is also expected to grow at an annual rate of 17-18% per year.
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