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High liquidity and foreign institutional inflows will drive the equity markets in the months to come, according to research heads of several broking houses.
They expect the markets to be broad based, though stocks in infrastructure sectors like engineering and construction are likely to give better returns going forward.
According to D D Sharma, senior vice-president, Anand Rathi Securities, "FIIs have been the drivers of the market till now, and they will be the crucial in future too. Liquidity is enormous in the international markets and the FII inflow will keep the Indian market buoyant."
At present, 11 companies have m-cap over $10 billion against seven in previous year 2004 and three in 2003. Devesh Kumar, head of equities at ICICI Securities, says the perspective on corporate performance is changing by the day.
"FIIs are no longer looking at quarterly results of companies, at earnings growth three to five years down the line. Despite short-term aberrations like the Gujarat riots and Mumbai rains, the broader India story is still bright."
However, Kumar is not sanguine about continuation of the market spiral in the near future. The market rally culminating in crossing 8000-point mark was achieved without the participation of PSUs. He predicts that the current rally will continue for some time. "The index may go up to 8,300-point mark before taking its future course," he adds.
Shahina Mukadam, research head, IDBI Capital Markets, says, "The future market growth will be led by infrastructure sector segments such as engineering, construction and cement."
On the negative side, the future of the market will be decided based on where the oil prices are headed. "If the prices are down from the present levels, it would give a boost to the market. But if it continues to rise, then there should be an increased export thrust to match the rising costs of oil imports," says Naresh Kothari, executive vice-president and head of institutional equity of Edelweiss Securities.
Kothari notes that further rise in the oil prices would lead to devaluation of rupee, leading to improved competitiveness of BPO and technology companies.
"Infrastructure story is strong now. Stocks of lifestyle-related industries are likely to see good prospects on the exchanges," adds Kothari.
He feels that the midcap segment of the market will post good results with their bottomlines witnessing a growth in the range of 20 to 30 per cent. Large cap stocks may see a growth of 17-24 per cent.
