We expect mega India investment story to unfold in CY07 as plans in road/ power infrastructure and real estate/SEZ/retail investments gather pace. Investment growth is expected to contribute well over half to GDP growth while its impact on jobs and incomes would continue to drive consumption. We believe global growth and liquidity profile remains conducive to emerging market investments and expect portfolio inflows to continue unless expected moderation in global growth turns into a recession. Risks for India growth story stem from any delays in execution of large project pipeline that creates worries over earnings growth. On the positive, lower commodity prices will benefit sectors like Auto, Aviation & Oil Marketing and also shave off 50-70bps from inflation over CY07. In a scenario of sustained growth, we expect Sensex to reach 17000 by December’07 at a stable 17x one year forward PE multiple assuming a 20% earnings growth.

Click here to download the report.