BENGALURU, Nov 30 (Reuters) – India’s stock market, which rallied to a record high this week, is forecast to rise another 9% by the end of 2023 despite widespread expectations of a gradual slowdown in economy, according to market experts polled by Reuters.
The benchmark BSE Sensex Index (.BSESN) touched an all-time record high of 62,887.40 on Tuesday, up 23% from this year’s low of 50,921.22 hit on June 17. at a record high.
Indian shares are driven by growing domestic equity fund inflows from a relatively young risk-averse population. Doubtless expectations are that most major central banks will slow their interest rate hikes, which partly explains India’s growth ahead of its two emerging market peers and developed market.
However, further gains through the middle of next year are likely to be muted, according to a November 15-28 Reuters poll of 27 analysts, brokers and strategists.
“Strong growth and … sticky domestic flows all contributed to strong outperformance in 2022,” said Rajat Agarwal, Asia equity strategist at Societe Generale. “But with a high valuation premium, we will likely see a pause in outperformance even if these factors remain supportive,”
The median forecast shows the Sensex gaining just 3.7% from Tuesday’s close of 62,681.84 to 65,000 by mid-2023. The Sensex is then forecast to rise to 68,000 by the end of 2023, for a total gain of almost 9%.
With a month to go, the index is only about 300 points below where analysts in a Reuters poll a year ago said it would be at the end of 2022.
The Nifty 50 (.NSEI), which also hit a record high, is forecast to gain 4.7% from Tuesday’s close of 18,618.05 to 19,500 by mid-2023, and reach 20,500 by the end of 2023.
But by most measures, the Indian market looks overbought.
In its latest report titled “Stay put while others catch up”, Goldman Sachs wrote that “market valuations are expensive in absolute terms, relative to its own history and bonds”, and added that the Indian stock market is at a record premium against the rest of the region.
Asia’s third-largest economy is widely expected to slow sharply in the coming months.
The Reserve Bank of India has raised its key policy rate by a modest 190 basis points since May to 5.9% and is widely expected to add another 50 basis points by the end of March, according to a separate Reuters poll.
However, a clear majority of analysts in the latest survey, 22 out of 25, said that corporate earnings will increase further in the coming months after strengthening the new which are quarters.
Morgan Stanley says it is bullish on equities but considers Indian markets, driven higher primarily by domestic buying, to be poor peers in 2023.
“The seemingly easy call for 2023 is that emerging markets are likely to benefit from a relatively more benign world compared to 2022, and given the growth of India and rich relative valuations, Indian equities are likely to see a reversal of relative gains,” wrote analysts at Morgan Stanley. in the latest client note.
(Other stories from the Reuters Q4 global stock markets poll package:)
Reporting by Indradip Ghosh; Voting by Vijayalakshmi Srinivasan, Veronica Khongwir and Maneesh Kumar; Editing by Ross Finley, Kirsten Donovan
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