So why’s Sensex at 17,374?

The IIP, it is true, has collapsed and, at 3.5% in April-February FY12, is less than half the 8.1% in April-February FY11. At 4% of GDP, the FY12 current account deficit seems perilous and the rupee’s fall appears to be reflecting this. So why’s the Sensex still at 17,374? The last time GDP fell to near the 6.1% recorded in Q3FY12 was in Q4 FY09 when it was 5.9%—at that time, the Sensex averaged around 9,000. At that time, the average Sensex PE was around 12.8, today it’s around 17.5-18. There’s no doubt this is much worse than it was a year ago, but if the sensex hasn’t collapsed, maybe there’s something we’re missing.

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