The stock market outlook for 2010 is locked. The intelligentsia has given its verdict. If you are looking to invest in stock markets from a one year perspective, expect your returns to be in the region of 10%-20%. No, we are not saying it. This conclusion was drawn from a survey among India's top fund managers who manage a whopping Rs 1.7 trillion collectively between them. The survey that was published in one of India's leading dailies has fund managers believing that insurance money could be a big driver during the next stage of rally and the same could help the Sensex move in a narrow band in 2010 with an upward target of 18,000 on the Sensex.
We would however refrain from giving such exact numbers. But even we would want to side with the majority of the fund managers in the survey. Our research is not throwing up as many fundamentally good stories available at attractive valuations as it used to do say about a year back. In other words, do not keep looking for that multibagger. It may not show up that easily as most of the gap between price and value has been filled up and now, it is more about earnings growth than expansion in P/E multiples. And hence, the 10%-20% growth that most fund managers seem to be anticipating could indeed be the right number as that is the rate at which the earnings of India Inc likely to grow in the near to medium term.
And now, it's the turn of milk prices to flare up
Sugar and milk. What a delightful combination. In fact, it could be called as the elixir of life. But it is turning out to be a deadly poison for one man, Mr. Sharad Pawar, the agriculture minister of India. Already under flak for not being able to check spiraling prices of sugar, a new front has opened against him. This time in the form of rising prices of milk. The agriculture minister seems to have said recently that the prices of milk and related products are set to rise because of the demand supply mismatch. As per him, there seems to be a gap of 18 lakh tones between demand and milk supply and with the same unlikely to be bridged in the near term, consumers may have to shell out more now for milk also.
While the various states and the center play a blame game on the inability to check spiraling prices of essential commodities, even if the objective of lowering prices is met, it is going to do nothing to solve the longer term demand supply mismatch. What we need is a structural change in production and not some ad-hoc measures like higher imports and release of more buffer stocks that provide only temporary relief.
But for a political class that is all too willing to accommodate near term relief at the expense of long term benefits, it will be wrong on our part to expect them to do too much, too soon. Meanwhile, be prepared to pay structurally higher prices for food items from hereon.