The benchmark BSE Sensex Index gained over 4% in 2022, making it one of the best performers among peers that mostly saw double-digit losses. — Reuters
BENGALURU: India’s equity market will rise less this year than thought a few months ago, mainly due to expectations of higher interest rates, according to equity strategists polled by Reuters, who also say the chances of a correction in the near term are low.
Against a better economic growth outlook for this year and next compared to many major rivals, the benchmark BSE Sensex Index gained over 4% in 2022, making it one of the best performers among peers that mostly saw double-digit losses.
But the trend reversed late last year, with the market down around 2% so far in 2023, largely unmoved by the reopening of China’s economy and an improved global economic outlook.
Uncertainties over a sharp sell-off in conglomerate Adani Group shares, after a critical report by US short-seller Hindenburg Research, have contributed to capital outflows from the Mumbai market.
While investor sentiment is expected to improve over the coming months, a sharp rally appears unlikely, partly on renewed expectations of higher interest rates in India and elsewhere.
At the same time, a clear majority of analysts, 17 of 25, said the chances of a correction in the next three months were low.
“Since October, Indian equities have seen their sharpest underperformance to emerging market peers in three years. This has shrunk the valuation premium to emerging equity peers, but not enough to bring foreign investors back,” said Rajat Agarwal, Asia equity strategist at Societe Generale.
“Valuations are still at the higher end of the historical range and consensus earnings expectations are quite optimistic, in our view.”
The median forecast of 28 equity strategists showed the Sensex gaining around 5% from Wednesday’s close of 59,744.98 to reach 62,610 by mid-year, a downgrade from 65,000 predicted in November. — Reuters
