Thursday, June 5, 2008

The march to 12000 Sensex and 5% GDP

There are no change in fundamentals – Global or domestic. The global downturn continues unabated.

Slight uptick in May in US economy was already expected as a result of the tax checks. Housing delinquencies and foreclosures are at a 25 year high, job lossses continue to increase and production numbers are going down (barring the May uptick). UK, Europe, Japan and China in varying degrees of slowdown

For India the pressures are increasing day by day. The Oil price under-recovery of Rs 2,00,000 Cr will result in transfer of wealth outside the country. Inflation will continue to rise for a while and manufacturing and services exports will keep going down on the back of lower global and domestic demand. Across the board, major factor price corrections to happen and income levels (individuals and institutions) to come down.

At this rate we are likely to end at a GDP growth rate in the range of 5% for 2008-09 and a Sensex levels of 12000.

Key points from my previous posts's – Global Economy

  • The world economy is "teetering on the brink" of a severe downturn and is expected to grow only 1.8% in 2008, the United Nations said.....
  • Europe (excerpt) - Jean-Claude Trichet, the head of the European Central Bank, has indicated that the worst of the credit crisis may not be behind us....
  • Slowdown continues across UK and Japan....

Key points from my previous posts's – Indian Economy

1. Growth slowdown - GDP growth for 08-09 likely to be in 5% range...

2. Oil price hike - India buying at $100 now compared to $ 60 range not too long in past. Will suck big part of disposable incomes with the population

3. Election uncertainty will hamper sentiment..

4. US recession (yup its in recession , though its yet to be 'officially declared' whatever that means) - its impact on our economy is yet to sink in. Seems to be a clear lag of 6 months. We are now in a stage where US was 6 mhts back.


1. 12000 levels for Sensex very likely in 6 months. If recession, then 10,000 mark likely to be breached in 12 mths.

2. Next twelve months all resources will get repriced :-

a) Interest rates will come down across board. Housing loan likely to go down to 7%, personal loans to 10%, Auto
at 9%.Those were the levels just a few years back.

b) Increments / bonuses / job change increments will come down. labour market will get more fairly priced.

c) Real estate prices likely to correct more than 30% from current levels.