Sensex musings

Indian stocks, the best performers in Asia so far in 2012, may extend their gains as a revival in policy decisions and stability in corporate earnings aid foreign fund inflows, CLSA has said. The possibility of further upsides are higher as domestic investors return to the stock market, it said on Tuesday, setting the Sensex target at 20,800, 13% higher than Tuesday’s close at 18429. The Sensex has gained about 18% so far this year, boosted by foreign institutional flows of $4.98 billion. Last year, the index had fallen 25%. The sudden gush of FII flows into Indian stocks comes amid easing liquidity conditions in the Eurozone and speculation over the likelihood of a third round of Quantitative Easing by the US Fed. Analysts said Indian stocks’ underperformance in comparison with US equities in 2011 also prompted foreign funds to start buying here. The prime minister’s office’s direction to Coal India to firm up supply agreements with power generators also contributed to the upbeat mood.