This is the outcome of a survey conducted by the Federation of Indian Chambers of Commerce and Industry, of more than 100 respondents including merchant bankers, foreign institutional investors, asset management companies, brokers, banks, financial institutions, corporates and individuals.
Around 77 per cent of the respondents expect the Sensex to be in the range between 5000 to 6000 in the next three months, while around 64 per cent expect the market cap of the Bombay Stock Exchange to remain in the range of Rs 1200,000 -1400,000 crore (Rs 12000-Rs 14000 billion) in the same time period.
India will also be one of the most sought after destinations for foreign investments in the coming years. The power sector is expected to attract the maximum investment from global fund managers, with the pharma sector also getting sufficient weightage.
There is also a dire forecast of a dip in the FMCG shares in the coming year. The problems in the capital markets, according those surveyed, are a multiplicity of regulators, low investor confidence and lack of liquidity and depth in the market.
An increase in the allocation of assets to India by global fund managers is based on the India becoming a global outsourcing hub, rising competitiveness and profitability of Indian companies, higher economic growth in the current year and fastest growing economy in the world.
A fairly low percentage (51 per cent) of those polled felt that the market is ready to move to T+1 settlement. About 81 per cent felt that margin trading and stock lending and borrowing were not popular.
The survey has suggested that in order to enhance the liquidity in the market there was a need to channelise household savings to equities, ease investment norms for pension funds and provident funds to invest in equity market and disinvest more in public sector companies.
A majority of the respondents felt that firms with good governance practices would command a higher premium in the markets.