Few events capture the resilience of an economy as dramatically as trends in the country’s equity markets. Backed by a 25% rise in key indices in the last 12 months, India’s markets are eyeing an all-time high for the Sensex in 2013 powered by a flurry of government-initiated reformist moves and a flood of investment from overseas funds.
The Bombay Stock Exchange’s benchmark Sensex is fast closing in on the all-time intra-day high of 21,206.77 points it had scaled on January 10, 2008. The Sensex had earlier hit an all-time closing high of 21,004.96 on November 5, 2010, which was powered by the debut of public sector Coal India Ltd on listing after the country’s largest initial public offer.
Two years later, Indian stocks are again set to first reclaim and then canter past the peak it had conquered a couple of years ago.
Global investment banking major Morgan Stanley has projected that there is 60% probability of the Sensex breaching 23,000 by December 2013.
“Fiscal prudence, steady improvement in infrastructure spending and progress on goods and services tax (GST), no major global risk off with range-bound crude oil prices and reasonable capital flows and steady monetary easing,” it said in a recent client note detailing the assumptions on which it expects the Sensex to mount new highs in the coming 12 months.
Analysts believe Indian stocks will continue to sizzle in 2013 as part of the money the US Federal Reserve releases, in a fresh round of monetary stimulus to shore up the economy, finds its way to emerging economies.
A lot, however, will depend on the pace of economic reforms in the months ahead. “The focus of markets would continue on reform initiatives and action from RBI on the domestic side along with resolving the fiscal cliff in US,” said Dipen Shah, Head of PCG (Private Client Group) Research, Kotak Securities.