Mumbai: The BSE Sensex is likely to rise more than 2% by the end of 2009, taking its gains to over 80% for the year, on increasing signs of a global economic revival, a Reuters poll showed.
The median forecast of 17 brokerages and investment houses signals the benchmark will close the year at 17,500 points, up from 17,126 at the close on Wednesday.
The 30-share index may add a further 1,250 points by the end of June 2010, the median forecast showed, thanks to an ongoing flow of funds into emerging markets.
“The economy is improving and companies will gain from this. Also, the market is attracting a lot of liquidity, which supports the growth momentum,” said Deven Choksey, managing director and chief executive of K R Choksey Shares.
If the index reaches the year-end forecast, gains for the year would be their largest since a rise of 82.1% in 1991. The benchmark ended 2008 at 9,647.31.
The highest year-end forecast had the BSE index jumping around 8% to 18,500, while four forecasts expect a drop, with the most pessimistic view calling for a fall of over 20% to 13,300.
The median forecast for mid-year 2010 was 18,750, or an increase of just under 10% from Wednesday’s close.
The most optimistic forecast for the middle of 2010 predicts the BSE index will rise to 23,500 points, but four estimates predict a drop from current levels. The most bearish forecast expected a fall of nearly 30% to 12,500 points by the middle of next year.
The index has more than doubled from a 2009 low in March, riding a rally across equity markets worldwide, and is up almost 80% this year as foreign funds have ploughed $10.9 billion into Indian stocks.
The market now trades near 16-month highs, but some analysts worry valuations are expensive and may temper future gains. Subdued monsoon rains -- crucial to the domestic-demand-led economy -- may also crimp corporate earnings growth.
Amitabh Chakraborty, president of equities at Religare Capital, expects US consumption to continue to disappoint.
“That will trigger a US sell-off, leading to pressure on emerging markets where valuations are already high,” he said.
“It can happen in the January-March quarter.”
The BSE index trades at 18.5 times forward earnings, much higher than benchmarks in other emerging markets such as South Korea, Indonesia and Thailand that trade at multiples of 12-13, but below the 21.3 times multiple for the Shanghai Composite Index.
Brazil trades at about 14.8 times forward earnings, while Russia trades at a multiple of just 7.9.
Major world central banks announced on Thursday that they planned to scale back massive injections of US dollars into their banking systems as financial markets stabilise after a devastating crisis.
A Reuters poll conducted in mid-July had expected the BSE index to reach 15,500 points by the end of December.