INDIAN STOCKS MARKET ANALYSIS----MID - LONG TERM NIFTY TARGET 19200 / 22000 +++: February 13, 2011

BSE Sensex Target 40000 +

BSE Sensex Target 40000 + in this Bull Market

Immpossible?

Illogical ?

Hopeful Wishing ?

These are the first thoughts of a Person who is seeing sensex struggling around 20000

But let’s start logically

First the clarification

It is not going to happen in 2011

may happen in 2012 or 2013 or 2014 or 2015

Any prediction or target can be set for 2 Reasons

1.Fundamental

2.Technical

1. Fundamental

Fundamental means Considering the Earnings and GDP growth and other things.

Sensex Rise and GDP Growth

There is one school of thought which says GDP Growth and Stock Markets are Correlated.If GD Growth is strong,it will translate into the good corporate earnings overall which will drive stock markets higher.

During the decade of 1980, Korean GDP grew at rate of almost 10 percent.And the stock markets grew at 18 percent per annum.

Similarly in the late 1970s in Taiwan GDP grew at rate of almost 8 percent and stock markets grew at rate of 9 percent per annum.

Instances of very high market returns occur only with high GDP growth.

Now India has very High growth rate of GDP ,So there is strong case of equity markets to grow to New highs .

2.FII investment

FII Investment is a factor of Sentiment and Indian image.In Oct 2010 alone in 22 Days ,they have invested over Rs 13000 crores in Indian Stocks.

It may become negative Some month.But the important point is that the options of FII’s are very limited.With Developed economies in US,Europe or Japan etc growing at very slow rate (in some cases there is pattern of negative growth),They have to look to emerging markets to get good returns.And India is one of the most strong and Liquid emerging market.

3.Boom Bubble

All the Emerging markets have gone through a Bubble when they changed from Developing state to Developed State.This is part of normal developing process .

See the Example of US in Early 1920’s to late 1920 ’s

From Lows of 63.90 in 1921-1922 it rose to high of 381.17 in 1929-30 Nearly 6 times increase from bottom to Peak .

Now The Example of japan when it was becoming a developed economy

It also Rose 4 times From Nearly 10000 to nearly 40000.

Important Point is that when GDP start Growing all the Stock markets form Bubble which we can call boom Bubble and India is yet to form that Boom Bubble.

During Bubble Time Japan’s Nikkie Commanded a PE Ratio of over 100!!!

Now Some people say that we have already formed a bubble or are dangerously near it

Bubble Characteristics : How to Spot a Bubble

Majority of investors should start believing that the High Stock prices are here to stay.

This is not happening ,Every expert analyst is suggesting to be cautious

There should be new theories to justify the Price Rise

Still waiting for them except this article!

There Should be environment of euphoria in markets

No euphoria in markets Markets are nervous right now

Skeptics should be brushed apart by Majority

Majority is skeptic right now

There should be entry of 1st time Investors who want to get rich quickly

yet to happen

Media should be full of Positive reports about stock markets.(Non Financial magazines)

Even financial magazines are not too positive on markets

Even the lowest paid persons are investing in stock market

lowest paid means the persons who are at bottom of Pyramid like waiters,Chai wala,Rikshawala,Your Washerman and other persons whome you least expect to invest in stock market.This is still not happening

Technical Analysis

Trading Ranges constitute important part of technical analysis.Say if a stock is trading in Range of Rs 100-150 and it breaks Rs 150,technical analysis suggest that new range should be Rs 150-Rs 200.