Is Sensex Cheap?

I was wondering if Sensex P/E truly reflects the picture next year. I took an estimate of profits of thirty Sensex companies as below:

Company	Net Profit FY2010E	Free Float	Free Float Profit
ACC	750	0.55	412.5
Bharti	8500	0.35	2975
BHEL	3500	0.35	1225
DLF	3500	0.25	875
Grasim	1800	0.75	1350
HDFC Bank	2650	0.85	2252.5
Unilever	2500	0.5	1250
Hindalco	2000	0.65	1300
HDFC	2800	0.9	2520
ITC	3750	0.7	2625
ICICI Bank	4250	1	4250
Infosys	6000	0.85	5100
Jaiprakash Associates	650	0.55	357.5
L&T	4000	0.9	3600
M&M	1250	0.75	937.5
Maruti	1500	0.5	750
NTPC	9000	0.15	1450
ONGC	15000	0.2	3000
Ranbaxy	750	0.4	300
RCOM	7000	0.35	2450
RINFRA	1750	0.65	1137.5
RIL	23000	0.5	11500
SBI	12500	0.45	5625
Sterlite	4000	0.4	1600
Sun Pharma	1500	0.4	600
Tata Motors	1250	0.55	687.5
Tata Power	1000	0.7	700
Tata Steel	5000	0.7	3500
TCS	5500	0.25	1375
Wipro	4250	0.2	850
Total			66455

The free-float market cap of Sensex today, i.e. 26 May 2009, is 981352 Crore at an index level of 13589.23. The P/E of Sensex in June 2010 with these estimates comes out to be 981352/66455 = 14.76, neither cheap nor expensive, and EPS of 920, a growth of 25% from today's EPS of 13589.23/18.47 = 735.

There are going to be equity dilutions from at least four companies that I know of, Reliance Industries (due to merger with RPL, dilution around 4%), Tata Steel (due to conversion of CCPS to equity shares on 1 Sep 2009, dilution around 15%), HDFC Bank (due to preferential allotment to HDFC at the time of merger with CBoP, dilution around 6%) and Bharti Airtel (due to merger with MTN). This will not add anything to estimated profits but may add to market cap and thus will increase P/E ratio.

I might be too conservative in estimating the profits, especially for capital goods, cement and auto. Let's wait for next June when I will revisit this post to see whether my estimates were near or not.