The National Stock Exchange index Nifty is expected to touch 9,960 level by December 2015, supported by liquidity, policy reforms and improving fundamentals, says a report.
According to global brokerage firm Macquarie, development backed agenda is expected to drive the country's economy as well as the equity market and the Nifty is expected to reach as high as 21,500 in next five years.
The Nifty has given around 36 per cent returns in 2014 so far this year as against 4 per cent return for MSCI World Index and is expected to give another 16 per cent return over the next 12 months, which should take the Index to 9,960 points, the report said.
The 50-share index today settled at 8,537.65, higher by 12.95 points or 0.15 per cent.
"We believe the market can re-rate further to 16-17x if economic recovery is stronger than expected. Our 12-month Nifty target is 9940 based on 15x FY17E EPS," Macquarie said in a research note today.
From being amongst the least preferred markets more than a year ago, India has climbed up the charts to being amongst the most preferred markets to invest in.
According to the report, the factors that are building up investor sentiments include, the Narendra Modi-led new government which brought about stability in an otherwise volatile political environment and improved market sentiment. In addition, there were affirmative action by the government on several fronts.
Moreover, with crude prices falling sharply, macro indicators have turned favourable and improved conditions for economic recovery to take shape.
"All of these are excellent conditions for an equity bull market to sustain for several years," Macquarie said and added that Nifty could reach 17,400-21,500 over the next five years.
Along with good FII inflows of around USD 16 billion so far this year, domestic mutual funds have turned net buyers with their net inflows aggregating to around USD 4.2 billion since May.
"Valuations may not be cheap but can sustain at high levels given that India is relatively better placed than other emerging markets," Macquarie said.
