Saturday, December 22, 2007

Sensex 21,250 by year-end

MUMBAI: 2007 has been a phenomenal year for Indian equities, and analysts expect indices to end it at all time highs as the bulls gear up for another run.

“Market sentiment is bullish after the latest Fed rate cut. We expect a further rise toward 21,250 in Sensex and 6,500 in Nifty by the end of the year,” said technical analyst Sandeep Wagle of Angel Stock Broking.

The US Federal Reserve disappointed world markets by a modest 25 basis-point cut instead of 50 bps on December 11, but Indian equities chalked up gains while Asian peers stumbled in reaction.

On Dec 12, Bombay Stock Exchange's Sensex closed up 85 points or 0.42 per cent at 20,375.87. The index scaled an all-time high of 20,419.11 intraday, recovering from an early low of 20,045.42.

National Stock Exchange’s Nifty ended higher by 62 points or 1.02 per cent at 6159.30, bouncing from a low of 6005.45. The index rose to a high of 6175.65 during the day.

A rebound in industrial production has also lifted market sentiment. Index of industrial production for October grew 11.8 per cent, the fastest annual rise in seven months, from an upwardly revised 6.8 percent in September.

“We will not be surprised to see the Sensex closing at 20,500 by the year-end since I see absolutely no triggers for a correction,” a more conservative Shahina Mukadam, head of research at IDBI Capital, said, adding that large-caps still look strong.

So far in December, the Sensex and Nifty have seen more positive closes than negative ones and risen by a whopping 5.13 per cent and 6.71 per cent respectively.

Even weak global cues have not deterred the momentum. Analysts attribute this resilience to strong participation from domestic players - high net worth, retail and institutional investors.

In the first week of this month, domestic funds net invested Rs 295 crore in equity, while foreign institutional investors net bought Rs 3523.2 crore, according to SEBI.

“I am extremely bullish and have set targets of 6,158 followed by 6,236 in Nifty by the year-end. Local sentiment is upbeat and I also expect more foreign money to flow into the market as a result of the Fed's move. 25 basis points has not gone down well with most global markets, but it is a fairly positive sign for us,” said Suresh Kumar Iyer, technical analyst at Asit C Mehta Investment Interrmediates.

What is encouraging is also the participation from the broader market consisting of mid-and small-caps. Second line scrips outperformed the benchmark indices in November and analysts believe there's a lot more steam left in them.

“Domestic participants have proved their strength in the market going by the way the mid-caps have moved up. I remain positive on these stocks and expect the rally to continue till the first week of January. Valuation-wise, they offer better opportunity to investors,” said Viral Doshi, independent technical and derivatives strategist.

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