The BSE Sensex is likely to extend its recent rally into 2010, underpinned by strong economic growth and an improving earnings outlook, but 
it is unlikely to repeat 2009's spectacular rise, poll showed.

The benchmark Sensex is likely to rise nearly 9 per cent by mid-2010 and by more than 12 per cent by the end of next year from Wednesday's close of 16,912.77, the poll found.

The median forecast of around 20 brokerages and investment houses, taken over the past week, has the benchmark rising to 18,375 points by the middle of 2010, and will likely end the year at 19,000.

"The Indian economy will do well. Corporate earnings will do well," said Jigar Shah, senior vice-president of Kim Eng Securities, who saw the Sensex rising to 21,000 by mid-2010.

The Sensex hit a record high of 21,206.77 in Jan. 2008.

Other analysts were worried that the withdrawal of stimulus measures and the impact of this year's weak monsoon could temper the stock market's strength.

"A lot depends on monsoon. We are on the edge as far as food reserves are concerned," said Arun Kejriwal, director of research firm KRIS, pointing to the galloping food inflation.

"If we have a bad monsoon, the market could really tumble," he added.

The benchmark is up by three-quarters so far in 2009 and on track to post its best yearly gains since 1991, with analysts polled expecting the Sensex to end the year at 17,000 points.

It had posted its worst yearly loss in 2008, when it slumped by more than half.

"Life is not going to be that easy for equity investors next year," said Rajesh Agarwal, director of CD Equisearch.

"You should see the gains this year in the context of the mayhem last year and, therefore, one shouldn't expect the market to rise sharply from this level in the year ahead."

The highest mid-year 2010 forecast had the BSE index scaling new highs and touching 23,000, while five forecasts expect a decline from current levels, with the most pessimistic view expecting the benchmark to decline 40 per cent from Wednesday's close to 10,115.

The forecast for the Sensex at the end of 2010 ranged from 10,893 to 24,000.

The BSE index has outperformed Japan's Nikkei, which is up 14 per cent so far this year, and a 50 per cent rise in Hong Kong's Hang Seng Index, but is just behind an 80 per cent rise in China's Shanghai Composite Index.

The BSE index trades at 21.8 times forward earnings, in line with the benchmark in South Korea, but higher than Indonesia which trades at a multiple of 15.8 .

China's Shanghai Composite Index traded at 24.1 times earnings while Brazil and Russia trade at about 17.6 and 13.3 respectively.