Sensex to cross 20K soon: FIs

The reforms unveiled by the government last week and improving global cues have prompted global financial institutions to swiftly change their outlook on the performance of the Indian stock market. Heightened inflation concerns, the fiscal deficit and weak business sentiment have given way to predictions that the Sensex will top 20,000 by December and cross 23,000 by the end of 2013.

Buoyed by the optimism all around, the Sensex has seen a spurt of 1,228 points or 7.1 per cent over the last nine trading sessions.

"The back-to-back announcements on fuel price rationalization and opening up FDI is a huge signal, symbolic of the government's reform commitment and an endorsement of its recognition of the urgency to put the economy above politics, for now," Deutsche Bank said in its report, adding that it expected the Sensex to top 20,000 by December.

Morgan Stanley set an aggressive target of 23,069 for the Sensex by December 2013, as it expected a flat earnings growth in FY13, and 19 per cent in FY14. Citi, which had set the Sensex target for December 2012 at 18,400, now expects the index to touch 19,900 in June 2013.

The optimism is not without concerns. Deutsche Bank outlined the government's ability to handle opposition and the outcome of the coal allotment controversy as concerns. Morgan Stanley has said the key risks are a quick rise in commodity prices, pushing inflation pressures, and gradual reduction in global risk appetite as policymakers slipped into another cycle of complacency.

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