The Sensex will touch 24k by Diwali

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Happy days are here again, at least for the Indian markets as there has been a trend reversal in the recent past. This trend reversal is expected to continue for the rest of the year. For the first time since Budget in February, the Indian measures—the Sensex and the Nifty—have given positive returns for the fourth week in a row. The optimism about the markets remaining robust and going forward is based on some developments that have already unfolded and some others that are set to take place in the near future.

The media have reported certain developments like the government allowing private airstrips to be set up, sops to the sugar industry, happenings related to the issue of 3G spectrum, Sebi allowing AMCs to launch real estate mutual funds (REMFs), and the Centre mulling the use of a part of the forex reserve for infrastructure. These and other developments point towards only one direction, and that is progress.

Following the subprime mortgage crisis that shook the US markets in July last year and the Indian markets began to experience its impact December onwards and later, and when the story of Indian companies suffering losses from forex derivatives began to unfold, the domestic markets started to experience correction after peaking in January.

Since then, every one has become sceptical about the future of the domestic market. There is no doubt that the run-up in the Indian markets was swift in CY07 and throughout the year, the markets did not witness any correction. Whatever setback the market received saw was at the end of the year and in the beginning of the new calendar year.

By this time, everyone forgot the bigger picture that China and India are still growing and are poised to become the fastest-growing economies. Indian companies might have faced a slower growth in profits for the fourth quarter of FY08, but some top firms have maintained leadership in their respective sectors.

For example, the ICICI Bank, which has said its net profit will grow 25% next year. Also, the Basel II norms that will come into force from 2009 will make the bank more aggressive in the sector. Mobile giant Bharti Airtel is getting ready to roll out its 3G services and Reliance Industries Ltd has plans to begin gas production in 2009. In short, many corporate stories are likely to unfold in the coming years.