Index to touch new highs

The BSE Sensex is poised to touch new highs in the next 3 months. In the new year 2006, the index will cross the previous high in the first 2 or 3 months.

The reason for the markets to reach new highs
- New Global Players are poised to enter into India. A lot of Global Investors have collected funds specific to India. This needs to be invested and normally the investments start flowing in the first quarter in the new year. This includes a major inflow from Japan.
- The indian mutual fund is sitting on a sizeable cash pile. With clarity coming up on ELSS schemes, the retail investor will definitely invest in these schemes. Also, the salaried people invest their funds for tax benefits during this quarter.
- Several sectors are poised for good growth including hospitality, travel and tourism and retail. The other booming sectors like IT and pharma will continue to do well.

The key local factors which might induce a correction are
- HNI and Operators selling to square of their year end during march
- Budget proposals

This writer feels that individuals can invest in mutual funds especially the Bluechip related funds since these are the stocks that will take the BSE Sensex to 5 digits and beyond. SIPs in these funds can be considered to average the cost of holding for a time period of atleast one year for good returns.