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From the Fund Managers Desk 1x1pix.gif (807 bytes)
1x1pix.gif (807 bytes)

Wednesday, August 24, 2011 11:37 Hrs IST

The Markets Are Now Trading At Less Than 14x FY12 Earnings Which Looks Attractive

DSP BlackRock Mutual Fund - Equity Market Overview

As of 17 August 2011, the Nifty index closed at 5,057, down 7.8% MTD while the Sensex Index closed at 16,841 down 7.5% mtd.

The index of industrial production, or IIP, rose 5.6% in May from a year ago. Manufacturing accounts for about 75.5% overall industrial output. Eight of the 22 manufacturing sectors reported a contraction in output during the month. Production of capital goods, an indicator of investment activity, expanded only 5.9% in May, against 7.3% in the previous month, while that of consumer durables rose 5.2%, compared with 3.7% in April

Headline inflation eased to its eight-month low at 9.22 per cent in July from 9.44 per cent. The non-food category in primary articles recorded a drop to 15.51 per cent in July from 18.57 per cent in June. The fuel and power category also observed a falling trend, from 12.85 per cent to 12.05 per cent in July.

Month to date, the economy has seen FII outflows of approx. USD 1bn from equities, while the YTD inflows have been approx. USD 1bn.


The markets have corrected further, down 3% over the last two weeks taking cues from the global news flows. Calendar YTD the Indian market is down 18%

Inflation continues to be at elevated levels, though the softening of commodities and crude oil to help the situation going forward First quarter results have come below estimates at 14% for the quarter ending June 2011

YTD FII inflows have been USD 1 bn

FDI was the strongest during the quarter (June numbers up 310% to $5.68 bn

With this correction, the markets are now trading at less than 14x FY12 earnings which looks attractive

Fall in global commodities on fears of US and Euro zone recession could benefit India

IIP data for June was strong at 8.8% vs. 5.9% in May

With this correction, India's relative valuation is in line with the other emerging markets. It has come down from 35% to 20%

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