Macro economic environment in India is expected to improve further and drive the BSE index, Sensex, to 33,500 by December-end, says a Nomura report.
The Japanese brokerage firm said its bullish stance on the Indian market for this year is based on the view that improvement in India's macro environment over the past year has been "durable" and will improve further.
"Our December-end 2015 Sensex target of 33,500 offers around 20 per cent potential upside from current levels," Nomura said in a research note.
"We expect market confidence in the sustainability of currently low inflation numbers to strengthen further through the year and believe interest rates are poised to fall further," Nomura said, adding that "growth momentum is already showing signs of improvement, which should be reflected in actual data through the year".
In 2014, the benchmark Sensex rose by 6,328.74 points or 30 per cent and recorded a record high of 28,822.37 on November 28. This is the highest annual gain since 2009 when it had rallied by 7,817 points.
According to Nomura, sector-wise, financials, auto, industrials and technology are looking bullish, while consumer staples, pharmaceuticals, metals and telecoms look bearish.
"At the end of 2015, we expect market confidence in the India Inc growth story to be much stronger than it is today," Nomura said, adding that "the macro background in India remains conducive for an expansion in overall multiples as we expect both growth and inflation expectations to improve".
It said the market's view on growth would strengthen during 2015, and interest rates are expected to improve on the back decreasing inflationary pressures.
Moreover, low oil prices are a key factor that could well erase a large chunk of India's current account deficit this year, drag down interest rates further and put the rupee on firmer ground, the report said.
Market's view on corporate profitability should also get better on the back of a cyclical recovery. In 2014 as a record market rally boosted the valuation of all listed firms to Rs 98.36 lakh crore at the end of year.
This was the fourth consecutive year of rise in investor wealth. The year also saw investor wealth hitting Rs 100 lakh crore mark.