You are on page 1of 2

INDIAN MARKRET: In the stock picker’s Zone

Sanjeev Mohta

I have done a very simple visual analysis which shows that the Indian market is in a stock picker’s
zone. While the direction of the overall market will be determined by global events and of course
India specific events, if one looks at the Indian market on its own, it comes out that :

a) Valuations are at long term average


b) Growth is at long term average
c) Sentiments are also average.

Thus, in an ideal world, over a longer term market should give average long term returns. Also while
there is no back testing done, but logic says that in such a market one should be able to generate
alpha by good stock picking.

For Valuation I have


taken Nifty/M1 as a
measure. We are at a
long term average
since 1997.

Source: Bloomberg

While the monthly


numbers on IIP are
shooting up, but that
is more because of
base effect. The pink
line is a 12 month
average is which is
exactly at a long term
average since 1997.

Source Bloomberg
The sentiment is
measured as a ratio
of the BSE small cap
index over the
Sensex. This again is
close to its average
since the data was
available (2003).

Source : Bloomberg