Outlook for indian stock markets

Market outlook:-

Each Time the Sensex corrects from highs,some common questions haunts retail investors:
"Are we going to correct more?Is it the rite time to buy? Is the market going to make another top after the correction just like every other correction happened in the past?" If investors get both aspects — the framework of this bull run and its longevity backed by high conviction levels — right, it will be easier to retain equity exposure amidst high volatility. While in the long term, the market is driven by factors like economic growth, earnings, valuations, economic health etc, in the short term, only two factors work — liquidity and sentiment.India is among the 10 countries in the world to have a trillion-dollar GDP and m-cap simultaneously. It is the 14th largest country globally in terms of m-cap and 12th largest economy in terms of GDP. It is also the fourth largest market in Asia (after Tokyo, Hong Kong and Shanghai), and India's GDP growth rate (over 9%) is the second-fastest globally.The country's per capita income has risen over 8% in the past 2-3 years.Domestic entrepreneurs are ready to play the global game with the mindset of creating Indian MNCs. These factors signify that India has reached global scale and size. The economy is on its way to becoming an economic super power. There will be some speed bumps along the way, but there won't be any U-turns.

As is the case globally, when economies undergo this transformation, the equity asset class creates wealth in the economy and outperforms most asset classes.India will witness the same phenomenon; equities will outperform most asset classes over 3-5 years. From a macro perspective, India may look a bit expensive, but taking into account the growth profile and possibility of value unlocking from balance sheets, it is bound to remain expensive.The idea is to take exposure in the right sectors and stocks.Greed- and fear-driven sentiments cause market movements in the short term. What happened in February/ March '07 reflected fear among market participants. As inflationary pressures started to cool off, the fear started receding, backed by strong corporate earnings and domestic and international inflows. Though the market performed well in April/May '07, there is a lot of scepticism.

Technically, market bottoms are an outcome of panic-selling as large buying dries out, while tops are made when investors feel left out and start buying to gain market exposure without paying attention to price — a phenomenon which may be termed 'panic buying'.But now we are coming out of the greed stage and moving towards the panic selling stage.How long it will last is a function of liquidity in the short term, global markets and news flows. There can be some bounceback before another correction sets in. Macro level concerns like the rupee's appreciation, interest rate pressures, US recessions,Fii selling will remain and may create an overhang.At the same time, there's enough appetite for corrections to buy Indian paper.The Sensex may remain in the 18300-20500 range in these jan-april quarter.