It's Deja Vous

What's common to all these opinions?

• Citigroup continues to be bullish on the Indian market and has set a BSE Sensex target of 23,950 to 25,000.

• Jigar Shah, Investment Advisor, KR Choksey Securities, Mumbai, says "The recent bullish trend of the market is a result of the unprecedented rise in global economic growth, longer boom cycle, lower interest rates, lower inflation and huge liquidity. In particular, emerging markets like India and China with their huge populations are growing very fast in double digits. Moreover, foreign companies are now looking at safer havens for investing their finances and funds, with India and China topping the list. Above all, the nine per cent growth of the Indian economy is encouraging an automatic inflow from FIIs, leading to the sudden upsurge in the stock market."

• Bhavesh Shah , VP (Research), Asit C Mehta Securities, Mumbai, says"India’s economic growth is projected to be in a higher trajectory (8-9 per cent) in the next three years. Infrastructure spending, domestic consumption and investment will continue to drive economic growth. And growth will attract increased capital flows, be they long-term or short-term in nature. Looking at the overall picture, I expect the BSE Sensex to be around 23,000 at the end of year.
• Gagan Banga, Indiabulls CEO is bullish on Indian economy and is expecting a Sensex target of 24000-250000 for the Sensex in next 12 months. His bullishness stems from the fact that the Indian economy is on based on sound fundamentals and none can effect the same, including US recession, for next 12 months.

These statements/opinions are to be expected after the Indian Sensex crossed 20,000 recently. Right ?

Wrong!

These statements were made in early 2008.

This is not an attempt to deride any of the above institutions or individuals. This is only to demonstrate that every time the markets go up much more than the fundamentals justify, the market makers use of the India growth story as a "fundamental factor" to justify the level.

In my humble opinion , the fundamental outlook for the markets, both local and global, is poorer than what it was in early 2008. The markets are being driven by pure liquidity. We should know it, accept it and participate in the market with this knowledge. This knowledge and acceptance alone, will keep us on guard when the markets turn down, which they will do eventually.

The question is When and not If. Be prepared.

Until then enjoy the Commonwealth Games.