Saurabh Mukherjea, head of equities at Ambit Capital told NDTV Profit's Prashant Nair that the base case for the Sensex remained 18,000 - 19,000 over the next few months.
"September will bring incremental reforms, ECB intervention in markets... That should lend support to markets," Mr Mukherjea said.
However, it would be no surprise if the Sensex hit the 21,000 mark this year, Mr Mukherjea added.
"The sort of liquidity the Fed and ECB are talking about... if that comes in September and October and if India surprises with reforms, for instance significant FDI that could take the index to 21,000. That remains the bull case," he said.
Mr Mukherjee said nothing meaningful can happen until the Parliament session ends. And here's what the government should do to bring cheers to the markets.
1) The first step should be a diesel price hike as soon as Parliament session ends.
"The odds are in favour of a diesel price hike else the chances of a downgrade for India are high," he said.
2) The decision to allow FDI in aviation does not need Parliament's sign off. If this is done, it would be a signal vis-a-vis reform appetite.
3) The final version of Shome Committee report comes on September 31. The government should give a final deadline when the report will turn into a law or issue a presidential decree to make it into law.
"The draft recommendations of Shome Committee are positive from an investors' perspective though they are a little negative from brokers' point of view," Mr Mukherjee said.
Meanwhile, here are the trading and stock recommendations by Mr Mukherjee.
1) Stick to quality stocks across all sectors.
2) There have been cracks in consumer spending in areas such as jewellery and auto, so investors should reduce exposure and shift to stocks like Voltas and L&T.
3) Indian banks have accumulated a lot of pain on their balance sheet. Private sector banks trade at superior multiples as compared to PSUs, but some of these multiples are not justified.
4) Bharti: Buy with a target of Rs 387. Bharti's efforts to maintain market share will bear fruit. Competition in the sector will reduce over the next few months.
5) Tata Motors: Buy with a target price of Rs 300. Assume JLR volumes of 3.61 lakh units for FY'13. Stock trades at 8-times FY'13 earnings.
6) Jubilant Foodworks: Sell with a target price Rs 727. See 22 per cent and 17 per cent same stores growth for Jubilant Food in FY'13 & FY'14. See stable EBITDA margins in the foreseeable future. There is pressure on gross margins due to deferred price hikes.
Disclaimer: Investors are advised to make their own assessment before acting on the information.