Prateek Agarwal, CIO, ASK Investment Managers in a chat with ET Now gives his take on markets today.
ET Now: How much further do you give to the market mood currently?
Prateek Agarwal: It is a liquidity driven rally; there are no two ways about it. So, the question must be answered in terms of where liqudity would go. That is an extremely difficult call. The part which is going up is not supported by fundamentals and that is where the challenge lies.
There are expectations of another round of LTRO at the end of the month. So, chances of the rally sustaining at this point in time is higher. So it could just sustain, may be the index patterns out for some period of time or may split out to stocks.
ET Now: From the way things are right now, does it seem more likely to take out 6000 before budget?
Prateek Agarwal: Yes, if the numbers like what have been talked about in LTRO happens. People have been talking of 500 billion euros about the LTRO at this point. We do not know which way the rally is getting into.
But suppose the expectation comes out true then obviously there will be more money sloshing around. Hardly any new issuances of paper, so on anybody’s call market may move up. There is more demand than supply right now.
So, one has to remember that the rally is not driven by fundamentals or supported by earnings numbers. Quarter after would have no support in terms of earnings. So clearly at this point of time we believe market is moving ahead of fundamentals. We did an analysis: 1340 Sensex EPS. If you take 15.5 times, you arrive at a number around 20000 for the Sensex. We are less than 9% from it and the target is for the year.
It is less than what you get on NCDs which are significantly safer than equity market as a whole. So clearly it is not supported by fundamentals. It can go higher because the surge in liquidity in near term would be high.
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