Log in
Show password
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

Indian stocks unlikely to recoup recent losses, correction likely

11/30/2021 | 10:27pm EST
Bombay Stock Exchange (BSE) in Mumbai

BENGALURU (Reuters) - Indian equities will not recoup recent losses until after mid-2022 on worries over COVID-19 resurgence and global monetary policy tightening, according to a Reuters poll of strategists which showed a correction was likely in the next six months.

Buoyed by easy monetary policy, a gradual re-opening of the economy and a rapid vaccination drive, the benchmark BSE Sensex Index has rallied nearly 20% year-to-date.

But the BSE index has dropped around 8% from its all-time high of 62,245.43 set on Oct. 19 as concerns mount over the Omicron coronavirus variant, dampening investor sentiment further.

The Nov. 16-30 Reuters poll of 35 equity strategists forecast the benchmark Sensex index to touch 60,450 by mid-2022, a gain of around 5.6% from Monday's close of 57,260.58. If realised, the gain would not be enough to recoup recent losses.

"We believe the inflation fear combined with the rise in COVID-19 cases globally may continue to trigger corrective moves in the following months," said Ajit Mishra, VP Research, Religare Broking.

Reuters poll graphic on India stock market outlook: https://fingfx.thomsonreuters.com/gfx/polling/gdpzydzzwvw/Reuters%20poll%20graphic%20on%20India%20stock%20market%20outlook.png

However, the index was expected to rise further to hit a high of 63,000 by end-2022.

Like most emerging markets, Indian stocks have witnessed a heavy outflow of foreign investment - a key driver for domestic equities - over the past two months as expectations of tighter monetary policy across the globe pushed major bond yields higher.

Yields on the U.S. two-year Treasury note, which reflects short-term interest rate expectations, hit their highest level since March 2020 last week before their steepest daily fall in 20 months on Friday.

The Reserve Bank of India is forecast to hike its repo rate by 25 basis points in Q2 2022, its first increase in more than three years, lagging peers such as the Central Bank of Brazil and the South African Reserve Bank.

Nearly three-quarters of respondents to an extra question, 25 of 35, said a correction in Indian equities was likely over the coming six months, with the median at 10%.

"We could see a 5-10% correction for Indian markets as valuations adjust to the moderation in earnings momentum. The market also remains sensitive to risk for EM equities from strong (U.S.) dollar and higher bond yields," said Rajat Agarwal, Asia equity strategist at Societe Generale.

Despite those downside risks, all but two of 35 strategists said corporate earnings would improve further over the next six months. That view was largely driven by expectations of a strong rebound in economic growth.

"We expect corporate earnings to improve in India over the coming six months, as economic recovery gains traction, even though we believe the economic recovery will be slower than expected due to persistence of (high) inflation globally," said Sher Mehta, director at Virtuoso Economics.

"We expect companies in the financials, industrials, capital goods and consumer discretionary sectors to perform particularly well."

(Reporting by Indradip Ghosh; Polling by Susobhan Sarkar and Md Manzer Hussain; Editing by Jonathan Cable and Alison Williams)

By Indradip Ghosh

ę Reuters 2021
Latest news "Economy & Forex"
04:05pBrazil government to veto 3.1 billion reais in budget items to fund payroll -sources
04:04pWall Street ends week down as Netflix disappointment deepens slide
04:03pDow falls for 6th straight session, longest losing streak since…
04:02pFor the week, the s&p 500 fell 5.7%, the dow fell 4.6% and the n…
04:02pDow suffers biggest weekly percentage drop since october 2020…
04:02pS&p 500 closes below its 200-day moving avg for first time since…
04:02pRussell 2000 weekly percentage plunge biggest since june 2020…
04:01pNasdaq posts biggest weekly percentage drop since march 2020…
04:01pS&p 500 notches largest weekly percentage decline since march 20…
03:56pGM sets $6.5 bln for in Michigan electric vehicle plants -document, sources
Latest news "Economy & Forex"