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The BSE Sensex is forecast to continue setting new record highs this year as foreign capital is lured into the market, especially if general elections return the business-friendly Narendra Modi-led Bharatiya Janata Party (BJP) to power, a Reuters poll found on Thursday.
The BSE Sensex hit a life-time high of 22,040.72 on Tuesday but the poll of 23 equity analysts, taken in the past week, forecast the index to rise further to 23,000 by the end of June.
It is then expected to hit 24,500 by the end of 2014, a 12 percent gain from Wednesday's close of 21,832.86.
India's top share index has risen 3 per cent this year, with foreign investors pouring in nearly $2 billion after ploughing in more than $18 billion last year.
Analysts expect overseas investors to continue buying Indian shares in the run-up to the world's largest democracy going to the polls in April and May.
"The market will keep going up until the (election) results are announced and the euphoria will last for a month or two after, until the budget is announced where people expect big bang reforms," said Madan Sabnavis, chief economist at CARE Ratings in Mumbai.
All but one of the 19 strategists polled expected the Sensex to rally in anticipation of reforms and draw further overseas funds if, as is widely expected, the opposition BJP wins the election.
However, 13 of the 19 strategists expect the index to change little or fall if the ruling Congress Party gains a majority. Only 6 said the index will rise in such a scenario.
"Since the market is fairly valued, a badly fractured election verdict will result in a sell off and a market crash," said V.K. Vijayakumar, investment strategist at Geojit BNP Paribas, adding that a coalition led by the BJP would likely extend the recent rally.
The current Congress-led coalition has been widely criticised for its inaction in pushing through key reforms, which has hurt economic growth and investor sentiment.
Analysts also attributed the expected rally in Indian stocks to a slight improvement in the outlook for inflation and fiscal balances.
BSE Sensex hit a life-time high of 22,040.72 and equity analysts forecast that the index will