Even though it fell 38 points to 14,478, the Sensex hit an intra-day record of 14,565 and that upward trend is no aberration, say several markets watchers.
ICICI Securities sees the Bombay Stock Exchange’s 30-company Sensex at 17,000 by the end of this year. Deustche Bank’s India strategy report dismisses suggestions that thereis a stock market bubble and sees a further upside of 5-10%. And Edelweiss Capital’s annual strategy report is bullishly titled Stay put but hold on tight.
Ridham Desai and Kulin Tanna of Morgan Stanley are the most optimistic: they think the Sensex will breach 50,000 in less than 10 years.
Merrill Lynch’s Jyotivardhan Jaipuria is a lone dissenting voice. In his report titled 10 thoughts for 2007, he points out that this could be a year of negative returns as interest rates rise and companies show a slower profit growth.
Most international and domestic brokerages agree with the bit on profit growth, but their bullishness comes from a common factor: growing investment in infrastructure that they expect to drive not only the economic growth but also help companies.
“We believe that the year 2007 would unfold the mega capex story of India Inc ” says the ICICI Securities report authored by Vinay Patel. It expects that kind of investment growth to contribute over half of the economy’s growth and that its impact on jobs will drive consumption.
Edelweiss Capital too sees infrastructure to be a key theme for 2007 and expects that by 2012, India would have spent around $300 billion on roads, ports, railways, power plants and the like. A Deustche Bank report says that “…this sector is likely to attract continuing policy support.”
The Sensex has risen by roughly 4% thus far in 2007, moving from 13,942 to 14,478, and the National Stock Exchanges index of 50 companies, Nifty is up by 4.69%, moving from 4,007 to 4,195.
On Monday, Reliance Communications Ltd tumbled 5% to Rs489 and Bharat Heavy Electricals Ltd ended 0.5% lower at Rs2,499.The Nifty lost 19.45 points, close at 4,195.90 points.