| ly state-run banks, in the light of a sharp decline in yields of government securities to 6 per cent by March 2009. The low downside risk to earnings among the Sensex components will be for Bhel and Sun Pharmaceuticals, while the earnings of Cairn, ONGC and Satyam Computer are likely to disappoint.
Research analysts at Credit Suisse expect the Sensex at 9,000 by the middle of the calendar year 2009, with the index likely to look up after the second quarter of 2009. Analysts see Corporate India's earnings to shrink briefly in 2009 on account of the rising cost of capital before rebounding to normalcy.
Most analysts polled expected that by mid-2009 volatility would abate and foreign funds would no longer be sellers, and conditions would be more favorable for the market to rise.
In conclusion, while Indian stocks may be trading close to their floor valuation, the market needs tangible positive catalysts to reverse the negative sentiment and liquidity trends. The market is unlikely to perform in the next six months because of the absence of positive catalysts. However, on a medium-term view till March 2010, the Sensex target is seen at 13,500. This estimate factors 5 per cent growth for 2008-09 and flat growth in 2009-10 and assumes a trailing 12-month recovery P/E of 15 times.
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