WORLD PREDICTIONS GO WRONG...SO IS SENSEX...

When the world didn’t end for the markets Published: Saturday, Dec 29, 2012, 9:28 IST  By Sachin P Mampatta | Place: Mumbai | Agency: DNA It wasn’t just the Mayans who thought 2012 would be a bad year.Market mavens felt nearly as glum about Indian equities.In fact, predictions for the BSE Sensex went as low as 11000-12000, according to a note by a large foreign brokerage released in December 2011.The Sensex instead gained 3989.92 points or 25.82% to close at 19444.84 on Friday, with one last session to go on Monday.FIIs were net buyers by rS1.27 lakh crore, the highest since the 1.36 lakh crore they poured in during 2010.  The banking sector was the highest gainer on hopes of interest rate cuts, its index gaining 56.56%. The debt-laden Realty index followed at 51.92% for the same reason.The fast moving consumer goods (FMCG), consumer durables, auto and healthcare indices gained between 38-50% on the domestic demand story.The only index to end with losses was the one tracking the information technology sector, down 1.13% on weak global sentiment.Sanjay Sinha, founder, Citrus Advisors, stated that the government’s moves towards economic reforms such as reducing fuel subsidy helped improve sentiment.“The sudden surge of energy in government circles enabled the economy to start coming out from its long slumber,” he said noting that this helped reverse a bout of negative sentiment following the unveiling of harsher tax provisions through the General Anti-Avoidance Rules (Gaar) which was announced in the budget and put off later in the year. Mavens are now predicting new highs for the market, albeit on the back of earnings growth rather than an expansion in price/earnings multiples.“The primary concern is the resolution of the US fiscal cliff crises(an impending budget tightening which may negatively impact the American and the global economy). In the event that this is amicably sorted and we have FII flows repeating the trend of the first quarter of 2012, then it is quite likely that we may have a front-ended rally in 2013,” said Sinha.N Sethuram Iyer, CEO, Daiwa Asset Management (India) said political and reforms developments would be a key driver for the market. “It is quite possible we could be looking at 15-20% upside which would put us at new highs.”The neglected cyclicals could be the ones to watch out for in 2013. “If we are going to have higher growth then it has to be anchored by the infra structure...growth has to come from construction, infra and capital goods space. Activity in the segment is likely to pick up around the budget when one could expect some announcements for the segment,” said Iyer. http://www.dnaindia.com/money/report_when-the-world-didnt-end-for-the-markets_1782907