The “Expansion-Extended”-global integration.

The indices will take southward journey as a correction (as posted on 8th June) only when the Sensex crosses the previous high. It usually happens when a stock crosses it’s previous high; it tends to touch a new high with 5-10% rise on previous high, then corrects and again crosses. So it also happens with the indices (on the long-term basis) extended the same rule, (Nifty has crossed the previous high 4360+), average 7% works out to be 3000+ points gain. In that case, Nifty journey may takes to a level of 4300*1.7 = 7100+. As Nifty reflects 50 companies, all companies won’t rise equally, on the first phase 3% rise works out to be 1290+ and Nifty could touch 5950-6020 ranges.
Even if we go by the P/E ratio rule, the current P/E works out to be 21.63 at 4509 and the historical experience used as a measure to extrapolate, the low P/E at 17-18 and high at 29-30 times. Even if there was no surprises in the growth in the earnings, the rule of “averages” helps to arrive P/E @ 17.5+29.5= 23.5, on a conservative basis Nifty could touch 4509*23.5/21.6 works out to be 4900+.
On the emotional positive trajectory, the earnings of the companies based on their growth plans and the Govt. spending is also very encouraging for the next five to seven years down the line. Just think of the visible earnings of the companies’ top line growth due to software & BPO’s opportunities. The potential investments in SEZs, malls and constructions by RIL, ONGC, DLF, Unitech, ADAG, Bharti, Munjals and other players. The expansion plans in power projects of NTPC, REL, Tata Power and transmission and the steel sector expansion by Tata Steel and Jindals.
The infrastructure expansion in roads, airports and in housing can invite more money in to the system. The food processing companies and outlets expansion spur the agriculture with a special focus on cash crops. The sugar companies expansion in ethanol projects. The oil exploration & natural gas and the end user companies expansion plans in refineries, power and fertilizers. The list can be extended to automobiles, cement pharma and other companies.
The new activities will emerge in mining, aviation, nuclear, biotech & life sciences and non-conventional energy sectors. To make all the plans a success and make money out of those works, just think of the multi- faceted roles to be played by the banks and the financial institutions, of course with insurance.
The whole effort of this “expansion”- to visualize the potential growth in India’s economy and the multiple effects. The long-term players benefit the most, as the fall becomes the best opportunity to accumulate and hold for better returns. The short-term traders survive by shorting to garner the scratch.