Mumbai: The Sensex, the benchmark index of the Bombay Stock Exchange, could trade above 25,000 in the next two years, according to the majority of market experts surveyed by industry lobby group, the Federation of Indian Chambers of Commerce and Industry (Ficci).
The index closed at 19,966 in Friday’s trade, up 170 points.
To be sure, the growth of the index from near-20,000 to 25,000 over two years, implying a growth of 10.6% a year, is not very impressive when compared with the more than 30% compound annual growth rate in the index. However, it is a significant rise at a time when some analysts are beginning to call the Indian markets overvalued, and also reflects the positive sentiment of market players.
“We had surveyed a pool of about 100 brokers, investment bankers, fund managers and insurance companies,” says Jyothi Vij, the Ficci executive who prepared the report. The responses were collected in the last week of November when the index started showing an upward trend after a correction in October. According to 55% of the experts, the Sensex will trade above 25,000 by 2010.
The survey paints an optimistic picture of the mood among domestic investors and market players. “Sustained economic growth, combined with continued market-friendly capital market reforms will...support... greater returns in the medium term,” a Ficci release says. However, 52% of participants say that the domestic institutions are not strong enough to support the market if there is a huge outflow of FII (foreign institutional investor) money.
A vast majority (94%) of respondents say FII inflows are the most powerful trigger for the growth of Indian equity market. Most of them also believe that the influence of FIIs on the market is increasing and that retail investors are following them blindly.
More than 90% of the respondents justify the Securities and Exchange Board of India’s curbs on participatory notes (an instrument through which some FIIs invest in the country), which led to the October correction, while 45% say this could affect inflows from FIIs. However, most rule out any long-term impact.
The participants strongly support disinvestment of state-owned companies through a sale of shares to the public.
Among industry segments, the participants in the survey say the banking and engineering sectors are the best performing ones and they expect the IT, pharma and auto sectors to underperform in the future.