By Indradip Ghosh
BANGALURU, August 24 (Reuters) – India’s stock market will post only minimal gains for the rest of the year amid rising volatility, according to strategists polled by Reuters who warned that risks from the lackluster outlook were biased to the downside.
The rout in global equities in the second quarter had hammered the benchmark BSE Sensex index .BSESNand concerns over the Russian-Ukrainian war, aggressive rate hikes by major central banks and concerns about growth were expected to persist for the rest of the year, dimming hopes of a sustained recovery.
Despite an impressive 15% rebound from this year’s low of 50,921.22 on June 17 and foreign portfolio investment turning net positive last month for the first time since October 2021, gains for the year are expected to be modest.
The median forecast of 30 equity strategists taken from Aug. 10-23 showed the Sensex gaining about 4.3% from Monday’s close of 58,773.87 at 61,280 at year-end. If realized, this 5.2% annual gain would be the smallest since 2016.
More than 60% of analysts, 14 out of 22, who responded to an additional question said the risks to this forecast were biased to the downside, with the rest seeing the risks biased to the upside.
“While we are bullish on capital markets in India, a Black Swan-like event could occur in the later part of this year. In this scenario, a crash in capital markets across the world…cannot be excluded,” RK said. Gupta, managing director of Taurus Asset Management.
“Therefore, a very, very cautious approach is required and profit booking should be a regular occurrence.”
This view was widely shared by a majority of respondents, 19 out of 28, who said volatility would increase over the next three months. The other nine said it would decrease.
Always the reference BSE index .BSESN is expected to rise to record highs of 64,150 and 65,300 by mid-2023 and late 2023 respectively, a gain of 9% to 11% from current levels.
With financial market pricing in the current global tightening cycle largely coming to an end by mid-2023, a deep equity market correction seems unlikely.
A nearly two-thirds majority, 19 out of 30, of analysts said the chances of another selloff in the next three months were low. The rest said it was high.
“We have already seen a major correction this year and have priced in known risks,” said Neeraj Dewan, head of Quantum Securities.
“However, if there is a real recession in the United States, we could have a correction in our markets.”
(Reporting by Indradip Ghosh; Polling by Anant Chandak and Devayani Sathyan; Editing by Bernadette Baum)
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