Indian stock markets set for new highs. Here's the Sensex target in analyst poll
India's economy is widely expected to have returned to growth last quarter
The Indian stock market is expected to hit new highs this year on hopes of solid economic recovery, according to equity strategists polled by Reuters. Indian stock market benchmark Sensex is expected to reach a record high of 54,000 by end-2021, marking a cumulative gain of over 13% for 2021. If realised, it would mark a third consecutive calendar year of over 10% gains.
India's economy is widely expected to have returned to growth last quarter, driven by the Reserve Bank of India's ultra-easy monetary policy and hopes of vaccine rollouts.
India's GDP may turn positive at 1.3% in the third quarter of 2020-21, having witnessed contraction in the previous two quarters due to the coronavirus pandemic, said a DBS Bank report. The government will release the GDP numbers for the October-December quarter of the current fiscal on Friday.
An expansionary union budget and a strong recovery in corporate earnings has pushed the benchmark Sensex over 7% higher so far this year. On February 16, Sensex had hit all-time high of 52,516.
However, that rally took a hit in recent trading sessions on worries about renewed restrictions amid a resurgence in coronavirus cases.
But a correction in Indian equities was likely in the next six months, according to 24 of 33 respondents. The average price-to-earnings ratio currently for Indian stocks was at a high not seen since at least the turn of the millennium.
"In this volatile market, where dips and bouncebacks are sharp, the directional trend is upwards. The fundamental reason for this trend, which is global, is the abundant liquidity available in the global financial system and the Fed's declared commitment to keep liquidity flowing and maintaining interest rates at historical lows. The takeaway from this is that markets can remain buoyant for an extended period of time. While riding this bull run investors will have to remember the fact that valuations are high and there is risk ahead," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Indian equities have made a strong comeback in the past six months due to the faster than expected pace of growth recovery," said Rajat Agarwal, Asia equity strategist at Societe Generale.
"At current valuations the market is clearly expecting a very strong growth recovery and sustenance of growth. A disappointment on the growth front could be a trigger for correction," added Societe Generale's Agarwal.
At 11:10 pm, Sensex was up about 500 points to 51,255. (Wit Agency Inputs)
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