Stock markets will remain bullish in 2007: survey

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Stock markets will remain bullish in 2007: survey

72% of the people questioned feel that though the market might witness higher volatility, the underlying strength would remain intact


A majority of India’s CEOs, merchant bankers and fund managers, expect the stock markets to remain as robust in 2007 as it was in 2006, according to a survey conducted by the ASSOCHAM Business Barometer.

As many as 72% of the people questioned feel that though the market might witness gyrations of higher proportions, the underlying strength would remain intact next year as well. This is because the economic fundamentals like GDP growth and the performance of key infrastructure sectors will continue to improve. Construction and electricity are likely to keep their pace in the next year as well.

Over 78% of those polled do not hazard a guess as to where the benchmark BSE Sensex would be in 2007. Still, they are sure about the long-term prospects of the Indian growth story.

The GDP is likely to grow by over 8% in the current fiscal year, making it the fourth successive year of average 8% expansion. What is more significant is the confidence of the Government as also the industry about the prospects in the next five years. The 11th Plan approach paper, as finalized by the National Development Council, has set an average GDP growth target of 9% for the next four years and 10% for 2012.

About 66% of the ABB respondents feel that Foreign Institutional Investors (FIIs) would continue to pour funds into the emerging markets in 2007, with India among the top investment destinations for most overseas portfolio managers. They expect Mutual Fund inflows to also remain buoyant.

Mutual Funds invested a total of Rs153bn in equity and debt during the calendar year 2006. The amount invested by Mutual Funds in equity outpaced that in debt by Rs12 2bn. A total of Rs137.58bn was injected in equity funds compared to Rs15.45bn in debt. Mutual Fund investment in each month increased by an average of 70% during 2006 compared to more than 100% in 2005. The increase in the total number of schemes during the year was 115.

The total amount invested by FIIs during 2006 was Rs422.75bn as against Rs416.63bn in 2005, recording a marginal decline of 1.4%. The average amount invested by FIIs each month was Rs35bn compared to Rs34.71bn in 2005.

The Sensex increased by 44% and the NSE Nifty 50 index rose by 37%, from January 2 to December 15, indicative of the overall robust health of the stock markets. While the Sensex rose from 9390.14 on January 2 to 13614.52 on December 15, the Nifty gained from 2835.95 on the first trading day of 2006 to 3888.65 on December 15.

However, a sizable 48% of the ABB respondents say that the Indian economy is showing initial signs of overheating, prompting the RBI to tighten the monetary policy. They say that inflation would continue to stay as a major trouble spot for the Government as long as the supply side constraints, especially in essential commodities are not removed.
Source:Indiainfoline