The benchmark Sensex will reach a record high by year-end, driven in part by confidence the government will likely pass through major reforms, according to a Reuters poll of strategists who said weak corporate earnings remain a concern.

With gains of over 15 percent so far this year, the Sensex has outperformed most major global indices, overriding worries about domestic company performance in part thanks to a pool of global investor cash looking for higher returns.

It is now forecast to rise a further 7 percent to 33,000 by the end of December from Wednesday's close of 30,834, according to the poll of 50 strategists taken June 19-28. It is then expected to reach 34,500 by the middle of next year.

That is an upgrade from consensus forecasts made in a Reuters poll just three months ago.

March predictions for the Sensex to reach 30,294 by the middle of this year were breached last month and it is close to passing end-2017 expectations.

Similar gains are forecast for the broader NSE Nifty, which is predicted to trade at 10,000 by end-2017, up about 5 percent from Wednesday's close, and then rise to 11,000 by the end of 2018.

"More money chasing few stocks can take the market to next all time high (levels). In addition, yields falling in other assets like gold, bonds and real assets will give the next required push to equities," said B.V. Rudramurthy, research head at Vachana Securities.

So far this month, $4 billion of foreign investment has flowed into Indian capital market, and mostly into stocks, after the government gave more clarity on the goods and services tax (GST).

The implementation of the GST, set to come into effect from July 1, will replace the existing multiple indirect taxes with uniform tax across India, making it easier to do business in Asia's third largest economy and in turn boost domestic stocks.

But the markets will need some time to adjust to the GST implementation process, which could partially hurt corporate earnings, although the ill-effects will likely fade in the long term.

Corporate earnings weakened in the quarter through January to March this year as many companies struggled after Prime Minister Narendra Modi banned high-value currency notes late last year.

That decision, declaring 500 and 1,000-rupee notes as null and void, wiped out around 86 percent of the currency in circulation, putting day-to-day business activities on the skid in a predominantly cash-driven economy.

Thirty of 42 analysts who answered an additional question said a correction of 10 percent or more is unlikely over the next six months, but just under two-thirds of those predict a correction of 5 percent or a bit more during that period.

When asked about a likely trigger, they identified disappointing corporate earnings, a delayed monsoon or weakness elsewhere in the global economy or markets.

"A 5 to 7 percent correction is seen in the near-term on weak domestic earnings growth, high valuations and likely uncertainties hovering around the implementation of the GST," said said Vinod Nair, head of research at Geojit BNP Paribas.

But a second consecutive year of normal monsoon, will be a major boost for the economy and stocks, say equity strategists.

Monsoon showers, which make up nearly 70 percent of the country's rainfall, are critical for the farm sector that accounts for about 15 percent of India's $2 trillion economy and employs more than half of the country's 1.3 billion people.

Sufficient amount of rainfall during the June-September period will keep inflation lower and improve income from agricultural sector, thereby boosting stocks of fertilisers and fast moving consumer goods (FMCG).

Retail inflation slowed to 2.18 percent in May, from 2.99 percent in April, the lowest since the series began in 2012. Persistently lower inflation has increased the chances of an interest rate cut from the central bank by the end of this year.

"We believe that one rate cut is coming this year and a good monsoon will provide a further cushion, which will be positive for the stock market," said Sudeep Anand, head of institutional equity research at IDBI Capital Markets & Securities.