Sensex will climb 18% by year-end: Strategists

Falling interest rates and growth-boosting economic reforms are proving irresistible to equity strategists.

The benchmark BSE Sensex will climb 18 per cent by year-end, according to forecasters at Macquarie Group and Deutsche Equities India Pvt, whose predictions in 2014 were the most prescient among 11 strategists surveyed by Bloomberg. The gauge surged the most since May on Thursday after the Reserve Bank of India (RBI) cut borrowing costs for the first time in 20 months in an unscheduled move.

Both strategists say stocks most tied to an accelerating economy will lead the advance as RBI Governor Raghuram Rajan further cuts borrowing costs and Modi boosts spending on roads, ports and power plants.

Both Macquarie and Deutsche predicted the Sensex would end at 28,000 in 2014, within two per cent of the actual level. Arora and Abhay Laijawala, the head of research at Deutsche, have the same target again this year, seeing the Sensex at 33,000. That compares with the 33,267 average forecast of nine strategists in a Bloomberg survey. The gauge fell 0.1 per cent to 28,038.03 at 12:11 pm in Mumbai trading.