Nifty at 9,960 by end-2015: Macquarie

The National Stock Exchange index Nifty was expected to touch 9,960 by December 2015, supported by liquidity, policy reforms and improving fundamentals, said a report on Wednesday.

According to global brokerage firm Macquarie, a development-backed agenda is expected to drive the country's economy, as well as the equity market, and the Sensex is expected to reach as high as 21,500 in five years.

The Nifty has given 36 per cent return in 2014 against four per cent for MSCI World Index. It was expected to give another 16 per cent return over 12 months, which should take the index to 9,960 points, the report said. The 50-share index on Wednesday settled at 8,537.6, higher 12.95 points or 0.15 per cent. "We believe the market can re-rate further to 16-17x if the economic recovery is stronger than expected. Our 12-month Nifty target is 9,940, based on 15x FY17E earnings per share," Macquarie said in the note. From among the least-preferred markets more than a year ago, India has climbed the charts to among the most-preferred markets. According to the report, the factors building investor sentiments include the Narendra Modi-led new government, which brought stability to a 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.