2006 Outlook – Safety First, As BUBBLE Arrives! End-2006E Sensex fair value remains 8500, 25% below current level. Recent earning upgrades (positive) negated by rise in interest rates (negative) on our market valuation models 1. Remain defensive; position for market cool off - although not as highly valued as earlier peaks, the Indian market now appears to be in a bubble zone. Flows of recent scale are hard to sustain 2. Tightening banking sector liquidity - a key fundamental concern Central bank interventions are now needed to avoid tightening liquidity and rising rates becoming detrimental to growth Local flows join the party The Indian market's near one-way 23% run up in the first 3 months of 2006 has been characterized by continued big FII inflows and resurgence in flows into domestic equity funds. Click here to download the report.

Posted by toughiee on Tuesday, April 04, 2006 at 11:17 AM | Permalink