Mumbai: The BSE Sensex was set for solid gains in 2010, driven by earnings optimism and supported by robust economic growth, albeit at a slower rate than last year, a Reuters poll found.
The 30-share BSE Sensex was seen rising 3.6% by mid-year and by nearly 11% by end-2010 from Tuesday’s close at 17,383, according to the median forecast of 20 brokerages and investment houses.
The benchmark was expected to rise to 18,000 points by end-June and end 2010 at 19,250. Forecasts ranged from 13,800-21,500. The year-end figure was up from 19,000 in a December poll.
“Earnings growth will clearly be a driver for the market this year,” said Manish Sonthalia, fund manager of portfolio management services at Motilal Oswal, who expects the Sensex to touch 19,000 by end the of the year.
Asia’s third-largest economy will expand by more than 7.2% in the year to March 2010, with growth accelerating to 8.5% in 2010-11 and 9% in 2011-12, according to government forecasts.
The Mumbai benchmark stock index rose 81% last year after the economy was spared the worst of the global economic downturn, with foreign investors pumping in $17.5 billion.
“If global cues disappoint, foreign inflows into our country will be hurt, and in turn impact our market,” said Arun Kejriwal, director of research firm KRIS. ”If we have more cases like Dubai and Greece, it could clearly hurt the risk appetite globally.”
Market participants broadly expected financial and capital goods companies to drive the market higher in 2010.
Banking stocks were widely expected to outperform the main index on improving credit offtake in an advancing economy.
”When an economy is moving ahead, banks’ advances are bound to grow. The growth of the banking sector is inevitable in a growing economy like ours,” said R.K. Gupta, managing director of Taurus Mutual Fund.
The outlook for makers of machinery and factory equipment is positive, analysts said, after the capital goods segment within industrial output rose 56.2 percent in January, from 15.9 percent growth a year earlier.
The BSE index trades at 16.3 times forward earnings, lagging China’s Shanghai Composite Index, which trades at 16.5 times. The benchmarks in Brazil and Russia trade at 12.8 times and 6.7 times respectively.