The SENSEX is now around 17,100. Is it cheap? Is it Expensive? Is it time to buy or sell?  While no one can predict the stock market in the short term, some metrics would help guide the investors. The most important metric is the Price to Earnings Ratio (PE Ratio). At present the PE Ratio for the SENSEX is around 21.    

   A different way of looking at it is that investors are paying an interest rate of 21% on their investment. It would make sense if the company's earnings would go up at least 21% going forward. However it is now agreed that the GDP growth rate may be below 7% going forward. That does not mean that the SENSEX companies' earnings grow at 7%.  They may grow at double digit rate.  

The inflation rate is above 15%. This would force the reserve bank to tighten the cash supply by raising the itnerest rates. That is not good for the stocks.

   But considering the global slowdown of the economy, and slowing demand for exports and services, there is not much upside for SENSEX in the short term.  The best way to play the market as always is to do "rupee cost averaging".

    Which means that you invest equal amount of rupees every 2 to 3 weeks in the stocks of the companies that you expect to grow.  This strategy would guarantee that you buy at an average price. This would cut your risk in the short term. In the long term the stock market growth would benefit you.  

The largest temple of the world, raised during the reign of Suryavarman-II in 12th century, is, in fact, located in Angkor, a major archaeological site of Cambodia. It is dedicated to Lord Vishnu. It is also one of the two temples intact in Angkor, Cambodia. The other is a Buddhist Temple. The largest temple of Lord Vishnu in Angkor is built according to Khmer architecture, original to Cambodia.

The Sensex ended the year at 17,464, up 114% from a low of 8,160 in March. Foreign institutional investors (FIIs) have poured in $17.5 billion during the year.

     The Sensex value is one number nobody in the government will talk about on the grounds that it is speculation. "I don't expect the Sensex to go up very significantly from current levels. The stock market has recovered too fast in the current year, so the opportunity for further increase will be limited," says Bhandare of TSMG. Adds Chakrabarti of ISB: "Some appreciation is likely on the back of continued FII flows. The Sensex will be in the 18,000-21,000 range by the year-end."

     Chakrabarti provides an overview: "Overall, in 2010 and beyond, the economy will continue to be strong on the domestic front. The driver of growth will continue to be internal consumption, the aspirations of a large middle class and the spread of the income base across different segments of the economy. We are now seeing the emergence of a much larger and far more powerful middle class with more buying power than ever before. The growth in the automobile sector, for instance, shows that the middle class has been sitting on a certain amount of surplus money which it is now ready to deploy. India is a very peculiar economy where the middle class has a long way to go in building a good quality of life in keeping with its aspirations. This, in itself, is a big driver of growth. The dampener to the economy, however, could come from the supply side. Food prices are a major concern. Within this, the issue is not just of poor monsoons and poor food supply, but also of food management."

     Bhandare of TSMG offers his own perspective. "Three significant aspects stand out in the Indian economy at present: The economy has shown tremendous resilience, there is a lot of flexibility and there is a great deal of tolerance among the Indian people -- 20% food inflation should have normally led to great social discontent and people should have been out on the streets. Consumer confidence is still shaky, but the confidence levels of industry, foreign investors and domestic investors are very strong. All these factors will influence the performance of the economy in 2010. One has to make a few assumptions while looking at the outlook for 2010: There will not be a repeat of a bad monsoon; there will not be another oil shock, and commodity prices will be reasonable; there will be no major dip in the international economy; and the government will abide by the policy reforms that it is promising."

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