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In its latest report on Indian equity markets, Reliance Mutual Fund said the global as well as domestic economic headwinds were expected to subside considerably in the next one year.Besides, it added, various policy actions initiated by the government for furthering the economic reforms would also help improve the corporate and investor sentiment.Terming the prevailing concerns as short-lived, Reliance MF said the environment might not remain as gloomy going forward and investors can expect better returns over 12 to 18 months.Based on its estimates for corporate earnings growth and other factors, the Sensex could rise to 23,100 level by August 2012, the fund house said.This would be higher than the record high of 21,206.77 points, which the Sensex scaled on January 10, 2008.The Bombay Stock Exchange 30-share index currently stands at 16,866.97 points and has lost over 1,900 points or more than 10 per cent in the past one year.The fund house further said the Sensex could rise to as high as 30,568 points by August 2012, in the best-case scenario for corporate earnings growth and other market fundamentals.The worst-case scenario pegs the index at 15,977 points by August 2012, while the average estimates puts it at 22,852, the report said in its analysis for the one-year Sensex forecast under various earnings growth and PE (price-to- earnings) multiples.In an earlier report published last month, Reliance MF had said that the correction trigged by concerns over debt crisis in the US and Europe could be seen as an attractive share buying opportunity for investors.It had also asserted at that time that a doomsday scenario like the one experienced during the global financial crisis of 2008 was unlikely to return to Indian markets, as the variables are very different this time.Taking forward its analysis in the latest report, the fund house noted, "Indian markets have remained under pressure for the last few quarters due to significant macro headwinds both on the domestic and international front."While the market has been pricing a lot of those concerns, we think these headwinds are peaking now. Investors should put in perspective that current concerns may be short-lived and the environment may not be as gloomy or rather be pretty decent over a year."The fund house said that Indian markets saw an outflow of USD 3 billion last month after the US rating downgrade."Other than global headwinds, domestic macro concerns have led to low risk appetite and in turn dismal portfolio inflows in Indian equities," it said.However, most of these headwinds would subside in the next one year, Reliance MF said.It added, "Other than inflation and rates, another key reason for the investors' despondency is the Govt policy inactivity and related uncertainties."Govt policy disappointment resulted in lack of confidence among corporates who postponed their expansion plans and that has disappointed investors. However, in recent weeks we have seen definite steps towards improving the policy environment."The report listed them as, "cabinet reshuffle, a much overdue fuel price hikes, revamped GST taskforce, softer stance on pesky environmental clearance issue and clearance of land acquisition bill, roadmap to cut down state electricity board's losses, etc."The fund house said it expects further pickup in momentum in policy action over the next one year, resulting into developments like introduction of GST (Goods and Services Tax) and DTC (Direct Tax Code), new banking licenses, FDI in retail and insurance and reforms on infrastructure financing.These developments could help assuage the investors' concerns, the report noted. [More]