Forecasts by two investment banks, Macquarie and Nomura, project a sensational turnaround in the Sensex this year. While the former has forecast the Sensex logging 22,200 points, Nomura is only a tad less optimistic and expects the index to touch 21,700.
For those seeking their fortunes in the stock markets and for the finance minister, these are wonderful tidings. But be careful what you wish for. Both investment banks have presaged their rosy forecast on potential rate cuts, easier domestic liquidity and reform momentum.
None of this is guaranteed. Not with the Reserve Bank of India governor signalling, as recently as Tuesday, that inflation continues to be its top concern. Not when the government is yet to provide credible proof that it is curbing fiscal profligacy. And not when political support for tough reforms is less likely with a general election due in little over a year. What happens to the Sensex then?