The Indian markets have witnessed a dream run in the recent past- largely due to a so-called ‘HOPE RALLY’ which augured to bring in winds of change for the Indian economic fortunes.

In the last five months, the Sensex soared by a whopping 25 per cent in the backdrop of the general elections in India. The market men placed high bets on a possible new government formation, and passing out of the previous incumbent UPA-led government.

Indeed, the Street has been pleased after the Narendra Modi-led Bharatiya Janata Party (BJP) won the elections as the single largest party in the electorate. The fact can ascertained, as the BSE index has surged by 7 per cent in just little under a month when the elections outcome were announced on 16 May, 2014.

The markets are now optimistically looking for the first NDA-budget, which will be the Interim Budget around the first week for July – for further roadmap and policy measures for the new government.

The entire trading and business sentiment of India has turned bullish following the landslide victory of the Modi government. As a result of which many prominent local and foreign brokerage houses and revised their Sensex targets for the calendar year and fiscal year-end.

SENSEX TARGET BY TOP BROKING FIRMS

FIRM NAME
TARGET
UPSIDE (%)
TIMELINE
Ambit Capital
30000
17.30
Mar-15
BoA Merrill Lynch
27000
5.57
Dec-14
BNP Paribas
28000
9.48
Dec-14
Citigroup
26300
2.83
Dec-14
Deutsche Bank
28000
9.48
Dec-14
Edelweiss
29000
13.39
Dec-14
Macquarie
28000
9.48
Mar-15
Nirmal Bang
28000
9.48
Dec-14
Nomura
27200
6.35
Dec-14
(Upside target % is based on Sensex previous close of 12 June, 2014)

Most generous among these seem to be Ambit Capital with the Sensex target of 30,000 by March 2015. In the near term, Edelweiss also seems strongly bullish with a target of 29,000 for the BSE Sensex by this December end.

Needless to write, there are some research reports which also indicate Sensex targets of as high as 100,000 in the next decade or so. While we do not rule out any level of optimism, we do advise investors to use their own investment logic and discreet while following others research reports.

Back to our main subject, to add to the positives – the Reserve Bank of India (RBI) in its first policy review under the new government surprised the Street with a 50 basis points cut in the SLR (Statutory Liquidity Ratio) and hinted towards possible rate cuts in future if inflation remains under control.

The recent IIP and CPI inflation data released on Thursday, 12 June, 2014, was under-lined the fact that the Indian economy is on its way up as the IIP rebounded to a 13-month high of 3.4 per cent, and the Inflation eased to 8.2 per cent.

Despite all the positive surroundings our market, there seem to be two major factors that can play spoilsport – the Indian monsoon and other global geo-political tensions.

The IMD (India Meteorological Department) has predicted that the monsoon this year could be 90-96 per cent of the Long Period Averages. The forecast is still above the 90 per cent deficit mark, as the El Nino factor is likely to play out towards the end of the monsoon.

Any adverse forecast or realisation could spell trouble for the Indian economy. As per official data, agriculture output has contributed by almost 14.1 per cent in the fiscal year ended 2012.

The next major factor is the geo-political tensions. The Iraq war has resurfaced after Sunni insurgents have resorted to fresh violence. According to the latest BBC updates, the Sunni-led Islamists have captured to new cities Saadiya and Jalawla in the Diyala province, after earlier taking control of Mosul and Tikrit.

Elsewhere, the Ukraine-Russia conflict also weighs on the sentiment. Given the geo-political tensions the Crude Oil futures have now soared to 9-month highs above $ 107-mark.

India cannot remain immune to large-scale geo-political worries. Hence, investors and traders should take a note of the same as these factors can play spoilsport in the near future for the BSE Sensex.

 

(Upside target % is based on Sensex previous close of 12 June, 2014)