INSUBCONTINENT EXCLUSIVE:
BENGALURU: Indian stocks are expected to erase recent losses and rise a little this year, but an array of political developments at home and
overseas along with just a steady economic growth outlook will likely restrain the market, a Reuters poll showed.
While the Indian stock
index gained nearly 7 per cent in January and hit a lifetime high, it is down about 4 per cent since then, tracking the rout in global
equities as worries of a trade war between the US and China intensified.
The consensus from the latest Reuters poll of over 50 strategists
and brokers taken May 21-30 points to gains for the BSE Sensex.
The index, which is up 2.6 per cent for the year, is now expected to gain
1.7 per cent from Tuesday's close to 35,550 by end-2018
It is then forecast to hit a fresh record high of 36,300 by the middle of next year.
But over a third of respondents forecast the index to
be lower then, including one strategist who expects it to dip to 27,500, a level not seen since January last year.
The consensus view is
also the weakest six-month outlook since at least the financial crisis and is also a slight downgrade compared to three months ago.
A
majority of poll respondents attributed their views to national election results or political developments outside the country.
More than
half the losses so far this year have come after an inconclusive Karnataka state election earlier this month
That has also coincided with the turmoil in global financial markets amid the political chaos in Italy.
"Ahead of the next year's general
election and ongoing global political uncertainties, the stock market will not show any large up or down move, remaining consolidated," said
Vedant Manore, a consultant and trader at Edelweiss Financial Services.
"But, if the (current) government wins the majority of seats in
Parliament, stock prices would rally on hopes of quick policy decisions."
Indeed, the more tempered view for a market used to double-digit
gains in recent years was driven by the political situation in Karnataka which has clouded the outlook for general elections next year.
The
surge in crude oil prices, India's biggest import item, has also weighed on stocks as it is inflationary and may push the Reserve Bank of
India to raise rates much earlier than previously thought - possibly as soon as August.
India's economy probably gained a little momentum in
the first three months of 2018 which should ensure that it remains the world's fastest growing major economy, a separate Reuters poll
showed.
Still, foreign portfolio investors (FPIs) sold $1.4 billion of Indian stocks this month, in line with a wide sell-off in emerging
markets, driven by the recent rise in US Treasury yields.
After hitting a 10-year high of 25.69 in January, the BSE Sensex price-to-earnings
ratio fell to 23.44 in May - above the long-term average of 18.74, suggesting stock prices are still expensive.
