Indian stocks set for muted gains by year-end, correction likely: Reuters poll

By Devayani Sathyan and Sujith Pai

BENGALURU (Reuters) – India stocks will trade only modestly higher at year-end, according to a Reuters poll of equity analysts who said a correction was likely before then, citing tightening global financial conditions as a risk.

Driven by positive foreign and domestic investment inflows, the benchmark BSE Sensex Index touched an all-time high of 67,619.2 on July 20, up around 18% from the year’s low of 57,084.9 set only four months earlier.

One of the best performers among emerging market peers, Indian equities are up over 7% for the year, but concerns over U.S. interest rates remaining higher for longer along with China’s slow economic recovery has halted the rally.

The median forecast in the Aug. 9-22 poll of 29 analysts showed the Sensex gaining 1.2% from Monday’s close of 65,216 to 66,000 by year-end, slightly higher than predicted three months ago.

“Broad thinking is that markets need some time to digest current gains … and the external environment is perhaps not as benign as it was maybe at the start of the year,” said Rajat Agarwal, Asia equity strategist at Societe Generale.

“The dollar is starting to gain and U.S. yields are rising. U.S. financial conditions are turning out as some kind of a headwind for markets right now so we expect the market can continue to be sideways for some more time before moving higher again.”

Over 70% of analysts who answered an additional question, 21 of 29, said a correction – a decline of 10% or more – in the Indian equity market was likely by year-end, including five who said it was highly likely. Eight said a correction was unlikely.

The BSE index was expected to reach 68,578 by mid-2024 before rising to 71,970 by end-2024.

The Nifty 50, which also hit a record high last month, was forecast to gain 2.1% from Monday’s close of 19,393.6 to 19,800 by end-2023, and 20,500 by mid-2024, when the world’s largest democracy will hold general elections.

(Reporting by Devayani Sathyan and Sujith Pai; Polling by Milounee Purohit, Veronica Khongwir and Anant Chandak; Editing by Jonathan Cable and Bernadette Baum)