Reference Auto

The interest rate hike recently to tame inflation has taken a toll on the stock markets and has even prompted foreign institutional investors or FIIs to shy away from the bourses but there is speculation that the Sensex could touch 23,000 points by the year end.

Besides FIIs, even mutual funds offloaded shares worth Rs 78.40 crore till May 5. However, for the moment, there is gloom ahead as corporate profits are set to be somewhat disappointing.

The BSE Sensex plunged by 617.15 points (3.23 per cent) to close the week ended May 6 at 18,518.81 points. The S&P CNX Nifty also tanked 198.05 points (3.44 per cent) to 5,551.45 points during the week.

But towards the end of last week, markets were on recovery mode with the falling of crude oil prices.

For the week ended April 23, food inflation was down to 8.53% mainly due to a slide in the prices of pulses. In previous two weeks in April, food inflation had headed north.

Among the sectors, Metal, Realty, Auto, Banking, FMCG, Consumer Durables and PSU were among the worst hit. In fact, all the indices moved down, witnessing moderate to sharp slide.

On the BSE, the biggest losers were BSE Metal (down 5.11%), Real Estate (down 3.90%), Auto (a fall of 3.57%), Bankex (down 3.11%), FMCG (a fall of 3%) Consumer Durables (down 2.79%), PSU (down 2.78%) and power (down 2.75%).

The BSE Mid-Cap index slid 3.25 per cent and BSE Small-Cap was down 4.28 per cent. Meanwhile, global bourses remained subdued (down in the range of 2-3 per cent) during the week.

Metals such as copper and silver remained in the red as commodity bourses went in for a margin revision to put a spanner on speculation.

Crude oil prices may have come down. But will this prompt the government to stay away from a price hike in the near term? This is unlikely though and after the assembly elections, we can expect a price hike.

In early February, the Sensex had ebbed to 17,296 points, and now the benchmark index is hovering around the 18,500 mark, which is a 1,250 points gain in just two months.

But even at this rate, the Sensex is most likely to miss its end-of-the-year target of 25,000 points and a new target, that is 23,000 points, seems achievable taking into account the current pace of the index.

If the Sensex manages to scale 23,000 points this year, besides share investors, mutual fund holders (who have invested in the medium to long term) would also rake in the moolah.

In fact, the gain for MF investors could be substantial and some five-star funds could provide you almost 100% returns (if you had invested four to five years ago) in case the Sensex manages to surpass 23,000 points by the end of the year.