'Sensex to scale 18K by March 2010'

India's bellwether market index, the Sensex, will remain undeterred by any downgrade in the country's GDP forecast and may even scale 18,000 level by the end of this fiscal, sustaining its northward trajectory, global research firm Macquarie says.

Earlier Rajeev Malik an analyst with Macquarie Group had downgraded India's economic growth forecast to 6.5 per cent for the fiscal ended March 2010, from 7 per cent on account of weak monsoon.

He said: "This downgrade is more a hiccup than the beginning of a GDP downgrade cycle," and added that 'our view on strategy for the Indian market remains broadly unchanged'.

"We believe the markets will be able to look through the near-term blip and do not see this GDP downgrade as a cause for concern," Macquarie said, adding, "over a longer time period, we maintain our Sensex target of 18,000 by March 2010."

The downward revisions of gross domestic product forecasts was mainly on account of poor monsoon and will actually impact the farm sector along with other related sectors and forecast for the non-agricultural have, in fact, been raised.

The sectors which are most likely to get impacted because of deficient monsoon include consumer goods and to a very limited extent telecom and cement, but interestingly for the Indian market, services and industry matter more than agriculture, it said.

Besides, Macquarie said, "The earnings upgrade cycle will sustain as long as non-agriculture GDP growth trajectory remains strong."

Moreover, the availability of offshore funding for Indian corporates has also started to improve and this will impact corporates which in turn will help in improving the Indian equity market trend.

"The run-up in the market has discounted the de-stressing of the market and from here on, we believe that earnings upgrades will be the key driver of stock prices rather than rerating," Macquarie said in a research report.

Meanwhile, as global liquidity markets free up, the Indian companies are expected to get some relief. Further the government's proposed plan to pay arrears to its staff before

October end would provide some fillip to domestic consumption, which in turn would boost the Indian market sentiments.

Going forward, Macquarie said, "over the next quarter or so, markets look a little expensive, and we think there is little near-term upside".

Besides, the GDP downgrade is seen to be more of a 'hiccup' than a change in trend and the forecasts for industry and services sector has actually been upgraded -- so fears of a "GDP downgrade cycle" are unfounded, Macquarie added.