Indian shares seen ending 2008 down 6.3 percent

By Sumeet Chatterjee

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 .BSESN 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.