The poll of over 20 traders, strategists and fund managers gave a median forecast for the pan-European STOXX Europe 600 index <.STOXX> of 365 points by the end of the year, versus Thursday's 337.54 close.

The index has surged around 10 percent since hitting a 15-month low in February, supported by a recovery in resource-related stocks and the ECB policy.

"So far, client participation in this rally has been low as sentiment is still very cautious. But we remain generally bullish on European equities," Edmund Shing, global head of equity derivative strategy at BNP Paribas, said.

"Valuations remain attractive, particularly dividend yields compared to other asset classes, economic momentum in Europe has been surprisingly strong and the ECB's action should support risk assets."

The euro zone's blue-chip Euro STOXX 50 index <.STOXX50E> was seen rising to 3,213 points by the end of the current year, while Germany's DAX <.GDAXI> was expected to rise to 10,500 points by the end of December, a rise of 7 percent and 5 percent, respectively, from Thursday's closes.

France's CAC 40 <.FCHI> will end the year with 5 percent gains at 4,600, Italy's FTSE MIB <.FTMIB> will close out at 19,250, representing a 6 percent rally, while Spain's IBEX <.IBEX> will post a 9 percent rise and finish 2016 at 9,500.

Traders and fund managers said lingering concerns about a further hike in U.S. interest rates and worries about volatile commodity prices could limit gains, but markets were expected to gather momentum in the latter part of the year.

"We can expect ongoing volatility for equity markets, particularly over the summer. However, improving fundamentals and a steady path of Fed tightening should help the situation to stabilise into year-end," IG analyst Chris Beauchamp said.

Among forecasts from leading banks, Barclays saw the STOXX Europe 600 ending 2016 at 370 points, Citigroup had a 380 points end-2016 target, while UBS saw the index climbing to 400 points.

Some analysts said lingering concerns about the pace of economic growth in China, the world's second-biggest economy, could result in another volatile year.

"We advise a reduced equity exposure in the first half of the year to prepare for increased volatility and asset price correction, which will present buying opportunities at lower valuations," said Lorne Baring, managing director of B Capital Wealth Management.

(Additional reporting by Sudip Kar-Gupta in London, Elisa Anzolin and Danilo Masoni in Milan)

By Atul Prakash