Even as business confidence is at a five-year low, a key Indian share market index is expected to remain bullish and top the 25,000-point mark over the next two years, reveals a survey by a leading industry chamber.
"Fifty-five per cent of the respondents predict the market level to reach 25,000 points and above at the end of two years," says the survey by the Federation of Indian Chambers of Commerce and Industry (FICCI).
"About 25 per cent feel that the Sensex would remain between 23,000 and 25,000 points," says the survey, referring to the key, 30-share representative index of the Bombay Stock Exchange (BSE) that is at present ruling at around 20,000 points.
The respondents of the survey on market movements were primarily brokers, chief financial officers, finance managers, investment bankers, mutual fund managers, portfolio managers, asset management companies and private equity.
The survey says the positive sentiment emerged despite the fact that overall business confidence is at a five-year low and gross domestic product growth has dipped to 8.9 per cent in the second quarter of this fiscal from 10.2 percent last year.
FICCI says the key market index has been fluctuating in recent weeks due to some factors such as rupee appreciation, participatory note turmoil, US Fed rate cut, rising crude oil prices and sub-prime crises.
"But this doesn't seem to have dampened the market sentiment. In fact, the mood of the market players is overly optimistic."
On sector-wise stars of the markets, the respondents identified the banking and engineering counters as those that will perform well, while returns from pharma, technology and automobiles will be below the market average.
Among various choices given for market drivers, 94 percent opted for foreign funds, 88 percent identified corporate earnings and only 59 percent gave their nod to global liquidity.
On the flip side, 81 percent of those surveyed said the increase in interest rates can have an adverse impact on the market performance and 77 percent felt high global crude prices was an issue of concern and could play a dampener.
"However, the majority of respondents did not consider the reduction in fed rates as a major influencing factor to the market movement."
Interestingly, the survey also revealed that a majority of respondents felt that because of the influence of foreign institutional investors on the markets, the retail investors followed them like a herd. "This can be a disturbing factor."
Also, while the outflow of foreign funds would certainly have an adverse impact on the markets, domestic institutions were not strong enough to sustain the pace of market growth on their own.
Yet, in the long run, domestic liquidity in the form of retail money, high net-worth individuals, mutual funds and unit linked insurance plans and pension funds can provide substantial liquidity support to the market.
"The policymakers, therefore, need to take active measures to strengthen these domestic institutions and mechanism."