The key question on the Street is whether the broader market has bottomed out and is it still viable to invest in equities, given the spate of domestic and global headwinds that we are currently grappling with?
A clear-cut answer would be rather difficult, against the backdrop of a broad downgrading of the local equity market by several brokerage houses and fears of further interest rate hikes by the central bank, going forward, in a bid to keep inflation in check.
The Sensex ended Wednesday's trade at 18,206 level and it has corrected nearly 13.3% from its intra-day peak of 21,108 in early November 2010. And this index has also been the worstperforming among its peers in the fast-growing BRIC nations and developed markets, like the Dow Jones, from early November. However, FIIs have taken tentative steps and are once again turning net buying in the local market in March, after a gap of two months.
FIIs in March (till the end of Wednesday trade) invested a net Rs 1,615 crore in local equities. According to heads of research of several broking houses, a key parameter that is once again driving inflows is the assumption that the worst is broadly factored into the market, in terms of rising raw material costs for India Inc and its potential negative impact on operating margins and earnings.
In addition, despite the policy measures taken by the central bank, the Indian economy is still expected to be among the fastest growing countries globally. The domestic economy is expected to grow 8.6% during the financial year ended March 2011. This development comes at a time when the broader Sensex currently trades at a P/E of nearly 17 times on a trailing four-quarter basis, and it has come down sharply from the levels witnessed a couple of months earlier.
And even though the current P/E of the local market is still higher than its peers in BRICS and developed markets, but it is expected to come down even further in the short term, according to analysts. They highlight that investors could only expect "modest" returns from the market in the short term, if at all, given several uncertainties like oil prices and the political inertia.
A clear-cut answer would be rather difficult, against the backdrop of a broad downgrading of the local equity market by several brokerage houses and fears of further interest rate hikes by the central bank, going forward, in a bid to keep inflation in check.
The Sensex ended Wednesday's trade at 18,206 level and it has corrected nearly 13.3% from its intra-day peak of 21,108 in early November 2010. And this index has also been the worstperforming among its peers in the fast-growing BRIC nations and developed markets, like the Dow Jones, from early November. However, FIIs have taken tentative steps and are once again turning net buying in the local market in March, after a gap of two months.
FIIs in March (till the end of Wednesday trade) invested a net Rs 1,615 crore in local equities. According to heads of research of several broking houses, a key parameter that is once again driving inflows is the assumption that the worst is broadly factored into the market, in terms of rising raw material costs for India Inc and its potential negative impact on operating margins and earnings.
In addition, despite the policy measures taken by the central bank, the Indian economy is still expected to be among the fastest growing countries globally. The domestic economy is expected to grow 8.6% during the financial year ended March 2011. This development comes at a time when the broader Sensex currently trades at a P/E of nearly 17 times on a trailing four-quarter basis, and it has come down sharply from the levels witnessed a couple of months earlier.
And even though the current P/E of the local market is still higher than its peers in BRICS and developed markets, but it is expected to come down even further in the short term, according to analysts. They highlight that investors could only expect "modest" returns from the market in the short term, if at all, given several uncertainties like oil prices and the political inertia.
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