Optimism is high in domestic mutual funds and foreign brokerage houses as the Bombay Stock Exchange Sensex crossed 6,000 on Friday.

A Business Standard snap poll of 30 fund managers and brokers, conducted over the weekend, revealed that nearly 73 per cent of them expected the Sensex to rise over the next three months, though the movement would be stock specific.

Foreign institutional investor inflows are expected to climb, or at least maintain their 2003 level. This optimism is based on the fact that the Indian equity market is still attractive and is yielding higher returns than other emerging markets, with the exception of China and Brazil.

Moreover, advance general elections are not expected to have any impact on market sentiment.

The market participants were asked five questions:

• What is your expectation for the Sensex over the next three months?
• How do you expect the market to move in 2004?
• What is your expectation about FII flows over the next year?
• Will the announcement of early elections impact market sentiment?
• What is your view on the valuations of Sensex stocks/Sensex price-earnings ratios now?

Over the next three months, the Sensex is expected to rise -- some of those polled suggested 6,400-6,800 -- but only after a correction.

The correction could come as early as late this week or early next week, the respondents felt.

Most of the respondents felt that the market had a lot of potential to rise further. "Any rise from the current level has to be based on actual events like the government restarting the divestment process," a broker said.

In other words, the market will react to events as they happen.

However, the action is likely to be centred on sectors or stocks, instead of index constituents as a whole. According to 55 per cent of the respondents, the election has been factored in, and it will have little or no impact on market sentiment.

However, the outcome of the elections will have an impact. While the majority of the respondents felt that the market was fairly priced, a good number said the market was underpriced, implying that there were opportunities for it to go up further.