Mumbai: The Bombay Stock Exchange’s key Sensex index has been hovering around the 16,000-17,000 levels as the year draws to a close. The Sensex is expected to range between 15,000 and 18,000 in the first half (H1) of 2010, says S. Naganath, president and chief investment officer of DSP BlackRock Investment Managers Ltd. Edited excerpts from an interview:

How are you feeling going into 2010—confident or slightly apprehensive?

As far as the macro indicators are concerned, the economy is showing great strength. We will close FY10 with a gross domestic product (GDP) growth rate of anywhere between 6.5-7%. The Index of Industrial Production (IIP) growth numbers are strong and exports are turning up. So the headline numbers are showing strong recovery.

Earnings growth for fiscal 2010 while it will be somewhat muted people are looking beyond that into fiscal 2011 (and) are expecting anywhere between 15% and 20% corporate earnings growth. So in 2010, in my opinion, we will probably see, in the first half, a period of consolidation, a period of rangebound movement before we move up later in the second half of 2010.

Do you mean consolidation like what we are seeing now? Has the process begun and is under way, you think?

Difficult to tell over a short period of time. Certainly, we have had a great year this year. One would never have imagined that end of 2008, 2009 would prove to be as good as it has been for the markets.

We are up more than 100% in terms of broad indices, so some degree of consolidation from here on I think is a realistic assumption. To put a range, I would argue that somewhere between 15,000 and 18,000 should be the expected range, in my opinion, in the first half of 2010 for the Sensex.

What to your mind is central risk or couple of central risks to this market for 2010, which could derail your hypothesis that we are rangebound and then move up rather than move down?

I think the risks are more external. As far as domestic factors are concerned, I do not see too many risks here. The external risks are if we have issues that cause risk aversion to rise, whether it is sovereign issues or whether it is the dollar rallying sharply, I think these are issues that could then cause a correction in global markets, which would then affect Asia and India as well. But other than that, I see the markets in a reasonably rangebound movement for the first half of next year.