`Fund managers see Sensex cross 7,000'

Fund managers expect economic growth to be around 6-7 % this fiscal with interest rates likely to remain moderate and rupee emerging stronger against the dollar.

"GDP growth expectations of fund managers for 2004-05 are converging to the 6-7% band," says a survey of global fund manager Merrill Lynch.

"There has been a distinct upward revision of expectations since the last survey with a few fund managers also looking at GDP growth between 7-8%," Merrill said in its India Domestic Fund Manager Survey.

Merrill Lynch estimates GDP to grow by 6.2%, which is in the consensus number.

Interest rate expectations have moderated significantly, given the sharp rise in yields from 5.75% to 6.75% following the reverse repo rate hike to 4.75%. "No fund manager expects the 10-year yield to rise over 50 basis points," it said.

Most fund managers believe that rupee will appreciate against the dollar, and the exchange rate has veered to the strongest this fiscal.

On the market, Merrill Lynch said fund managers are more bullish on the long term, and no one expects the Sensex to be below 6,200.

"A significant 64% expect the Sensex to cross 7,000, with 27% expecting the Sensex to be between 6,600-6,999 and 9% expecting it to be around 6,200-6,599," it said.

Investor sentiment is bullish in the short term with majority fund managers expecting the Sensex to move between 6,200-6,499 over the next three months, it added.

Most fund managers expect over 20% growth in profits, largely in line with Merrill Lynch expectations.

"We, however, believe that we are now probably at the peak of the earnings upgrade cycle," Merrill said.

Earning outlook is most favourable for capital goods and engineering due to infrastructure and investment demand followed by cement, IT and financials, it said.