Q: There was one school of thought at the start of this year that maybe we don't end the year too badly, as in by the end of 2010 people still make money but at least there will be a meaningful deep in the first half of the year. So far we have had a dip but that is 4,700 Nifty that is not as meaningful as some people would have thought, do you think that is the extent of the downside in the first half of 2010, no more?
A: I think that situation can happen only and only if we basically cross a much higher level. As I was saying that at the levels of about 5,300 for the Nifty, we have to keep in mind that we are trading at 17 times one year forward, we are trading at about 22 times on a trailing basis. Now that band of 22 P/E multiple is virtually a historic high barring January 2008 but otherwise on most occasions, our markets have failed to sustain above 22 times on a trailing earnings basis.
So I again feel that if for any reason we do cross that level of 5,300 because of significantly higher liquidity or because issuances gets spaced out or if the fact that the government gets a lot more aggressive on reforms, which basically triggers buying which leads this market to get into levels of 5,500-5,700, then I think from that level, we do stand a serious chance of correction. But the possibility of that still looks remote and that is because it is going to be difficult for this market to cross 5,300.
However if we do cross that level, get into that band of 5,500-5,700 in the next two-three months, then that could trigger a correction because those are levels which may not be sustainable.
