India:Stock Market Scenario AnalysisA reader recently asked for a scenario analysis of the India Stock market. So here is a table showing various forward looking scenarios, the probability of the scenario, scenario Earnings, P/E multiple and hence projected forward looking Sensex value.You can create the same spread sheet and change the probability to look at your unique scenario.(click to enlarge)I have given the following probabilities to potential economic outcomes over the coming year:Good times: 5% Normalized: 40%(average of the past 15 years)Contracting earnings : 45%Stagflation:10%(stagnant growth with inflation)We get a projected Sensex level of 10,482 or 15.9% higher than the October 29, 2008 close of 9,044. I think a minimum return of 20% should be demanded of this risky market...so we have a negative potential return of 4.1% at current market levels.At a buyin level of Sensex 8,700 we get a potential return of 20% or breakeven.This translates into a Nifty level of 2,550.Every analysis I do brings me back to my post 2009 Outlook for Nifty/Sensex.My advice continues to be the same...wait for better buying opportunities.Lee's DhabaThe content on this mail is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
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