The stock market boom would continue in 2006 on the back of strong macro-economic fundamentals, an apex industry chamber said on Friday.
"The Indian stock market is likely to go up further in 2006 as the boom conditions of 2005 are expected to continue in 2006," a study by Assocham Eco Pulse said.
The macro-economic fundamentals like the GDP growth projections, including the industrial production, improvement in the services would remain buoyant in 2006 also, the study said.
The growth in the market can be gauged by a rise in Sensex, which grew by 189 per cent during 2001 to 2005, marking an increase in the wealth of investors in the stock market during the last four years, it said.
The benchmark Sensex increased to 9397.90 on December 31, 2005 from 6602.69 on the same day in 2004 showing a gain of 42.33 per cent. The year 2004 similarly ended with gains over the close of 2003 which itself had seen improvement over 2002. The consistent year-on-year uptrend had started by the end of 2001.
Corroborating the findings of the study Assocham president Anil K Agarwal said, "The Indian capital market is climbing great heights and is expected to remain buoyant in years to come due to the strong macro economic fundamentals."
Investments from foreign institutional investors will continue to come in 2006 as well. In 2005 alone FIIs had invested over $10 billion and the trend is likely to continue in line with the past y-o-y improvement trend of the last four years.
The Indian economy too is expected to grow by more than 7 per cent in the current fiscal. "If certain missing links like the infrastructure bottlenecks are put in place and the monsoon turns out to be normal, the year 2006 will certainly be an improvement over 2005," Agarwal added.
As the Indian economy scales new peaks, the world economy too sees a robust growth. According to estimates the US economy will be improving between 3.5 and 4 per cent. In Asia, China would continue to grow and Japan too would follow suit.
The study said the Indian market has a huge potential waiting to be tapped. With a population of over 100 crore (1 billion), there are only 60-70 lakh (6-7 million) investors comprising of only 0.06 - 0.07 per cent of the population. The households' investments in the capital market too have fallen from 23.3 per cent of gross financial savings in 1991-92 to a dismal 1.1 per cent in 2004-05.
The study said that if the household savings are invested in the market, then more funds will be available for investment by corporate India.
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