Ambit Capital has put out a Sensex target of 36,000 for end March 2016, implying a 27 per cent upside over next five quarters.
Indian economy is expected to record 6 per cent growth in 2015-16, Ambit Capital said in a research note released on Friday.
A surge in earnings growth to 18-19 per cent levels in 2015-16 from the level of 12 per cent this fiscal will help achieve the Sensex target of 36,000 by end March 2016.
Ambit Capital expects Sensex EPS (earnings per share) to hit 1,790 by March 2016.
"It will be a slow cyclical recovery. Indian economy will chug along assisted by industrial recovery that will boost earnings growth", Saurabh Mukherjea, CEO of the Institutional Equities business at Ambit Capital told BusinessLine here.
The capital expenditure will have to largely come from public sector and the extent to which the fisc can afford it, he said.
The recovery in capex cycle would be a key in achieving the Sensex target of 36,000. Also, there will be no more PE (price earnings multiple) re-rating and it will all depend on earnings growth, Mukherjea said.
Ambit Capital has in the latest research note reiterated its long-held point of view that Indian economy and markets have entered their fourth wave--fourth cycle (of economic growth) of ten years.
"This (2014-15) will be the first year of three-to-four year recovery wave. The first three years of a ten year economic cycle is generally lucrative for the stock markets", Mukherjea said.
While this year has seen the Sensex go up by 36 per cent, the next year could also see it provide return of another 25 per cent, he said.
On RBI's likely monetary policy stance on December 2, Mukherjea said he does not see any need for RBI to cut policy rates now.
Srivats.kr@thehindu.co.in