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[dudette]

-In a widely expected move the RBI raised CRR and Repo rates by 50 bps on Tuesday night.

-PLRs will now rise above 16.75 per cent on average, making borrowings even more expensive for Real Estate and Capital Intensive projects.

-Advise Investors to short/outright sell all Real Estate stocks across the board, and all companies with big expansion plans in Cement, Steel, Paper and Petrochemicals.

-After having sold off all Industrials, get busy shorting SBI, HDFC BK, ICICI, BOB and BOI.

-With near 17 per cent borrowing costs, and a 11 per cent official inflation rate and nine months to go for FY09, the GOI is looking to pull back growth to about 6 per cent and not 7.5 to 8 per cent.

-Industrial profit margins already under pressure will further reduce and earnings growth will drop down to about 9 per cent for FY09 giving a Sensex earnings projection of Rs 900.

-Giving the Sensex companies a PE of 9, based on a 1:1 to earnings to growth rate, the Sensex should sink to about 8500 to 9000 by December 2008.

-Worse, All Banks are about to be hit by higher rates, non performing loans, higher provisions and lower growth.

-Valuations at 14 times FY09 earnings for State owned banks and 20 times for private banks, and 2 times Book are extremely stretched, with significant downside risks on earnings per share and return on capital employed.

-Banks Outperform only when GDP expands and Business Cycle is positive.

-Both Positives seen over the past 5 years are now reversing.

-Rising Inflation, Declining liquidity and rising interest rates will ensure that Banks show a sustained period of Under Performance.

-PE Valuations likely to contract to single digits, and Price to Book multiple closer to 1 to 1.4 times.

-Key Risks to earnings remain for high PE private banks led by ICICI, HDFC Bank, Axis, Bank of Rajasthan, BOI, BOB, SBI and PNB.

-All Banks and Real Estate stocks can lose 50 per cent of their market value over the next six months.