BSE Sensex Expected to Rise by 26 Percent This Year

The BSE Sensex is likely to rise this year (2012) in spite of concerns over the government's finances and political stability. A poll conducted by Reuters indicated that BSE Sensex might gain 26 percent this year, hoping on interest rate cuts to bolster growth.

According to the median forecast from a survey of 24 investment houses, the 30-share BSE index is likely to hit 18,000 mid-year and reach 19,500 points by the end of the year.

India's growth rate fell to 6.1 percent in the December quarter but investors are optimistic that things will turn out good with inflation subsiding. Experts expect Reserve Bank of India (RBI) to reverse its policies and reduce interest rates by 50 basis points in June. Signs of U.S. economic recovery and settlement of Greece debt crisis has already sent Sensex up by 10 percent this year.

""RBI may start reducing (the) repo rate from April/May onwards in order to boost growth momentum," Reuters quoted K. K. Mittal as saying at Globe Capital.

Respondents to the poll predicted that the government would miss its fiscal deficit as it is not in the mood to take up economic reforms. Foreign investors are still confident and had purchased about 470 billion rupees in Indian equities so far this year as of March 23, after net sales of about 36 billion rupees in 2011. But sadly, it has dropped this year.

"Although the FIIs had shown a good amount of confidence by investing heavily in the first quarter, and helped the index to move up, the sustainability is dependent on the reforms and economic fundamentals of the domestic economy," Reuters quoted Madhumita Ghosh sa saying at Unicon Securities. "This presently is not very sound due to pressure on fiscal deficit," he added.