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Ficci survey sees Sensex at 5000 levels in a year

BS Markets Bureau

Though the Sensex will remain bound within a certain range for the next three months, it is likely to rise to the 5,000-level in a year on the back of a global recovery and an improvement in the Indian economy.

This is a finding of a nationwide business confidence survey conducted by the Federation of Indian Chambers of Commerce and Industry immediately after the Budget. The survey's findings were released in Mumbai on Tuesday.

The Ficci survey questioned 100 respondents, comprising top brokers, traders, merchant bankers, mutual funds, stock exchanges and foreign institutional investors, 70 per cent of whom were based in Mumbai.

Of the respondents, 86 per cent were of the opinion that the Sensex would remain bound between 3,000 and 4,000 for the next three months, while 62 per cent said the same range would prevail for six months.

They were optimistic about an increase, with 50 per cent of the respondents saying the Sensex would settle between 4,000 and 5,000 in a year. And 21 per cent expected it to go beyond 5,000.

As many as 57 per cent of the respondents based their optimism on the belief that the world economy would come out of the current recession. Sixty-two per cent believed that the domestic economy would pick up too.

Though the respondents unanimously agreed that the market capitalisation would remain in the range of Rs 4,000 billion to Rs 5,000 billion in the next three to six months, 71 per cent predicted it would cross Rs 5,000 billion.

While 57 per cent of the respondents believed that the old economy stocks would be the most coveted ones, 43 per cent felt banking scrips would outperform the rest. And 38 per cent felt technology stocks would be the best performers.

There was a mixed response to the new mechanisms recently launched. A large section -- 86 per cent and 57 per cent of the respondents, respectively -- believed that the market had adapted itself to the rolling settlement regime and that it did not require further education on this.

However, the participants were pessimistic about growth in the derivatives markets.

While 57 per cent was of the view that the market had adapted itself to the derivatives functioning, 90 per cent felt there was a need for further education in this area.

Of the respondents, 48 per cent felt that the new mechanisms improved liquidity, helped in bringing down trading and transaction costs, and improved investor sentiment.

The decision of the Securities and Exchange Board of India to move stocks to a T+3 trading cycle has received a lukewarm response.

Only 52 per cent of the respondents believe the Indian stock market is prepared to move to the new settlement cycle.

The introduction of margin trading also did not enthuse the respondents. As high as 71 per cent was of the opinion that margin trading had not improved the liquidity situation in the market, 52 per cent blamed banks for the failure of margin trading, and 43 per cent attributed it to the lack of proper guidelines.

What's more, 71 per cent favoured the involvement of stock exchanges in operationalising margin trading.

The Sebi should have greater control over insider trading, said 52 per cent of the respondents.

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