Blood bath in the market

Pradeep Rane
03 May 2004

Mumbai: After a spectacular rise in equity market with the Sensex gaining over 75% in financial year '04, direction of the market this year will largely depend on the outcome of the general elections. This is evident from the huge 213 point fall in Sensex last Tuesday following the exit poll results which suggested a hung parliament.

There was blood bath in the market last week with stock from across the sectors
were battered. The mood in the market is caution. This is evident from a recent fund manager survey conducted by DSP Merrill Lynch, the leading foreign brokering firm. The survey found that the fate of the Sensex will depend on the poll outcome.

Merrill Lynch polled fund managers on their Sensex targets post elections over the next quarter. Of the 60% the of fund managers polled expect the market to rise anywhere between 5-10%, while 30% were on the higher end of the band expecting a rise of more than 10%.\

The survey gave out interesting Sensex targets based on poll outcome. It found that fund managers believe if NDA coalition comes with over 300 seats then the markets will likely rise to 7000. If it get between 272 to 300 seats, then markets likely to be in the 6250-6750 range.

Fund managers felt that if the NDA coalition gets between 250-272 seats, then the markets would likely be range bound at 5500-6250. If non-congress, non-BJP led minority government comes into power, the latest exit poll does not rule out this, then the markets will likely fall below 5000.

Even with the Sensex closer to its all time high, 50% of the fund managers polled that the Sensex was undervalued while the rest polled in favour of fair valuation. Not a single fund manager felt that markets were overvalued. Half of them believed that markets
were more than 10% undervalued, the DSP Merrill Lynch survey said.