Market: 11500 Target - Merill Lynch

Merrill Lynch expects negative returns in 2007 - index target 11,500 for December 2007 (15x forward earnings), a 10% drop from current levels. Remain positive on the economy and expect GDP to grow 7.6% in FY08 led by infrastructure spend.

However, markets will likely be dragged by:
(1) Near term rising inflation and interest rate worries;
(2) Slowing corporate earnings (expect to slow to around 13% in FY08 vs. 25% recent years);
(3) Rich valuations at nearly 18x 1-year forward earnings are the highest in a post-bubble era &
(4) Supply of paper as we expect $12 bn over next 6 months to put pressure on flows to the secondary markets

Thats a big call to make for Index.. Market is headed for consolidation. The large caps are seeing consolidation and small and mid caps are running..

As one of our associate put it..
Nifty PE Range > 2002- 13 to 19, 2003- 11 to 21, 2004- 12 to 24, 2005-13 to 17, 2006-15 to 22 Markets move on PE ranges, pinning one pe number is not a wise action. Current Market P/E is around 21 so really its at the upper end of the mean which is around 17