Indian shares seen ending 2008 down 6.3 percent
BANGALORE (Reuters) - Indian shares are set to rally by the year-end but will end down 6 percent on the year as a whole, driven by a global economic slowdown and withdrawals by foreign funds that put an end to a six-year bull run, a Reuters poll of analysts showed.
The Bombay Stock Exchange's main 30-share index is seen falling to 19,000 points by the end of 2008, posting a drop of 6.3 percent on the year, the median forecast of 15 Indian and European analysts polled by Reuters last week showed.
In an early December poll, analysts had seen the market end 2008 more than 10 percent above where it was trading then.
The index is forecast to reach 15,500 by mid-2008, rising 4.5 percent from the current levels. But then it is set to rally in the second half of the year, ending 2008 at 19,000, up about 28 percent from where it closed on Tuesday.
The poll was conducted ahead of the news of a fire sale of U.S. investment bank Bear Stearns that sparked a global equities rout on Monday, pulling down the Indian market to its lowest since August 2007.
Analysts say the Indian equity market, one of the worst performers in Asia this year, is also likely to be weighed down by rising inflation, and slowing economic growth in Asia's third-largest economy.
Data showed last week India's annual inflation rate rose further above 5 percent in early March to a nine-month high and analysts said mounting price pressures would keep monetary policy tight despite more signs of slowing growth.
India's economy grew by an average of 8.75 percent annually in the past four fiscal years and the government estimates growth of 8.7 percent in the current year ending March, slower than the 18-year high of 9.6 percent in 2006/07.
"It will be a challenge to make money in the stock market this year," said Sejal Doshi, chief executive of Mumbai brokerage Finquest Securities. "The last three months have been pretty painful for the market and I don't see a revival in this situation in the near future."
The BSE index recorded its strongest growth in four years in 2007 posting a rise of 47 percent. It gained 3.5 percent in 2002, nearly 73 percent in 2003, 13 percent in 2004, 42 percent in 2005 and 46.7 percent in 2006.
The index, which closed at 14,833.46 points on Tuesday, has fallen 27 percent so far this year, and is more than 30 percent below its record high of 21,206.77 hit on January 10, on worries about global credit turmoil and U.S. recession.
Last week Citigroup (C.N) said it was reviewing its 2008 target for the Indian index as it cuts its earnings and economic growth forecasts for the country.
It had set a 2008 target of 23,950-25,050 points on January 7 for the index. The index is currently 69 percent off Citi's upper end target.
"Markets will be cautious and look for visible growth opportunities," Aditya Narain, head of India research at Citi Investment Research, told reporters last week at the firm's India Investor Conference in Mumbai.
"Valuations have been high and there is an element of froth," he said, adding that the rise in Indian firms' earnings could slow. Continued...
