Earning upgrades would propel the S&P BSE Sensex to touch a historic high of 32,200 by the end of this year and 35,000 by June next, according to global brokerage firm Citi.
The Sensex had touched an all-time high of 30,024.74 on 4 March, 2015.
The December forecast would mean a rise of about 14% over Wednesday's closing of 28,223. On Thursday, the Sensex closed at 28,298 points.
The Sensex has gone up by just over 2% so far this year. If the index rises in line with the projection made by the brokerage, the gain would be 17% for the full year.
The firm expects the markets to see "more earning upgrades than downgrades" in the second half of the current financial year 2015-16.
"It's still an earnings downgrade cycle - but the pace & extent is falling, and the number of upgrades is rising. While our numbers have been snipped too: at 13 per cent/19 per cent growth over FY16/FY17. The market will have to be patient - but H2FY16 on, (we believe) more for upgrades, than with downgrades," said Aditya Narain and Jitender Tokas of Citi, told The Economic Times.
Even though the sales of many companies remain under pressure due to several factors such as "moderating demand, inflation and commodities", their profit margins continue to rise, showing decrease in costs and "increased corporate focus on profitability."
While companies' earnings are subject to global cyclical pressures, there has been some continued growth in the defensive sectors such as IT and pharma sector, it said.
"The domestic cyclicals - the market's big hope - remain flat, with only the private banks & autos holding ground. This mix has not changed much over the last 3Qs (remains very skewed), but 2HY16 is when normalization should start," the brokerage added.