SEE OTHER REPORT..WHERE TO WORRY FUNDAMENTALLY TO WHOM WE CAN SAY WRONG?

Not to be outdone by Citigroup with a high-end target of 16000 for the BSE Sensex 30 market index, the Economic Times featured an article by Dawnay Day AV Financial Services which argues that “With this newfound enthusiasm about the long-term prospect of Indian economy, it’s conceivable that Sensex will continue its northward journey in ‘07 and beyond. It could touch 20000 in 18 to 24 months.”
The reasoning given is somewhat flaky, and the comments on valuations could be taken to argue against this lofty target: ” . . . the P/E multiple for the BSE Sensex (on a one year forward basis) at 17.9 times, which is 42% higher than the average P/E of 12.6 times in the last nine years. However, there is a strong case for these premium valuations . . .”