Fund managers see range of 16,000-18,700 for Sensex by Mar 12

``Most of the fund managers expect the Indian equity markets to be in the range of 16,000-18,700 by the end of March 2012,`` according to ICICIdirect Fund Managers Survey.

``Earnings growth expectations have been revised downwards both for the current as well as the next fiscal year. Although most of them believe that valuations are more reasonable, a majority of them are cautious in the short-term,`` it added.

``A majority of the fund managers believe that allocation towards equity markets at current levels should be increased with an investment horizon of one year and above. Due to current higher yields and expectations of overall interest rates coming down in 2012, the Indian debt markets remain the most preferred asset class,`` it further added. 

ICICI Securities in its Fund Managers Survey has covered 16 domestic fund managers from the mutual fund industry. The Fund Manager Survey is conducted on a quarterly basis. The previous survey was done in August 2011. 

Equity Markets

Where do you expect BSE Sensex at the end of March 2012?

Total 75% of the fund managers do not expect major downsides for the markets from current levels and do not expect the market to be below 16,000 levels by the end of March 2012. Half of the fund managers surveyed believes the market will be in the range of +/-5% from current levels till the end of the current fiscal year FY11-12.

Where will you broadly position the Indian equity market on a valuation scale?

Most of the fund managers continue to believe that the markets are fairly valued while none believe it to be overvalued. As compared to the last survey, a higher percentage of fund managers believe that the markets are undervalued.

What is your broad outlook for the markets in the next three months?

There has been a marginal increase in optimism where 19% of the fund managers are bullish towards the overall market as compared to 13% in the last survey. Majority of them remain neutral in the short-term.

Compared to the previous three months, are you more confident about investment in the equity market?

Most of the fund managers are now less confident towards equity market investment as compared to the previous survey. The number of fund managers who are cautious toward equity markets have increased from 30% to 50%.

What could be the major global risk for Indian markets?

According to most of the respondents, the European sovereign crises are a major cause of concern for Indian equity markets. Higher crude oil prices also remain a major risk.

What is your corporate earnings growth expectation for FY11-12 and FY12-13?

Earnings growth expectations have been revised downwards by the fund managers for both FY12 as well as FY 13. Earnings growth for the current as well as next year has been revised down to less than 10% by a most of the fund managers while the outlook seems incrementally better for the year FY12-13 with higher number of them believes growth to be in 10-15%.

Which segment of the market would you prefer with an investment horizon of one year?

Preference toward large caps has increased due to increased volatility. However, midcaps also remain preferred for many of the fund managers due to attractive valuations.

Rank the sector according to your preference..

FMCG and pharma sectors continue to be the most preferred sectors. Preference for both sectors has, in  fact, increased as compared to the previous survey. IT sector has again found favour among the fund managers. Selective stocks in Infra/Capital goods sector have also seen increase in preference.  Sectors that have seen a decrease in preference as compared to the previous survey includes BFSI, auto, oil & gas, telecom and metals.

Debt Markets

Where do you benchmark the 10 year G-Sec yield in three months?

Total 75% of the fund managers expect the 10 year benchmark G-sec yield to be in the 8.50-9% range. Select few of them believe the yields will be above 9%.

With a six months horizon, which segment of the debt market do you expect to deliver better returns?

Short-term debt funds remain the most preferred segment due to elevated short-term rates and better risk-return trade-off. Many of the fund managers were more optimistic towards G-sec funds due to a sharp rise in yields. 

Investment Strategy

Which asset class do you think will outperform in the rest of the year 2012?

Opinion seems to be divided over the asset that will outperform in the year 2012. While debt markets Due  to current higher yields and expectations of overall interest rates coming down  in 2012, the outlook for Indian debt markets remain positive. Range bound with volatility on global news flows is the verdict for the equity markets. Most of the fund managers advise a buying on dips strategy for the equity markets.

What equity market strategy would you suggest now?

With valuations more reasonable, most of the fund managers believe allocation should be either maintained or increased towards equity markets. However, as compared to the previous survey, less percentage of them advise to increase allocation at current levels.

Source: http://www.myiris.com/newsCentre/storyShow.php?fileR=20111207110904043&dir=2011/12/07