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marketstrategyGlobal markets sold off in May primarily over concerns on the ongoing developments in Eurozone. Over the past month, the DowJones and FTSE were down 8% and 7% respectively. There were significant losses on Asian indices as well with Sensex losing 3.5% . By and large, markets were not convinced that the bailout package was the end of the debt problem and feared that more Euro nations could face crisis similar to Greece.

Going by these developments how did India Inc fair?

The Indian corporate sector reported healthy numbers for the fourth quarter. 4QFY10 BSE-30 Index net profit grew a robust 25.9% yoy. The GDP growth for fourth quarter came at 8.6%, a significant improvement over corresponding quarter of the previous year.

So what's in store for Indian markets ?

From hereon, the markets would be focused on the developments on the monsoon front and of course global events. In the past ten months or so, markets have been largely range bound and have been consolidating between 15500-17600 levels. At this level, valuations are not demanding, but reasonable at 14.8X FY2011E EPS and 12.5X FY2012E EPS.

A full-blown, double-dip recession led by sovereign debt issues in Europe and the US may lead to rapid outflow of FII money from India as in 2008, which in turn could lead to a healthy correction. Currently markets are the higher band of 17000 levels and it could test the lower end of about 15500-16000 levels. Break of this lower band could take it lower to about 14000 levels.

Investors could use this global-led correction to invest in a staggered manner, with medium to long term view.
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