INSUBCONTINENT EXCLUSIVE:
further over the coming year, according to a Reuters poll of equity strategists, but those gains will be limited as fiscal stimulus and easy
monetary policy fail to reverse an economic slowdown.The BSE Sensex index was forecast to rise another 6.7% to 43,645 by the end of next
year from Monday's close of 40,889
corporate tax cut.That expected rise in stocks in the Nov
11-26 poll of 50 strategists would be half the rally so far this year and similar to the average rate for fixed deposits - a relatively safe
asset - in Indian banks."The slew of measures announced by the government in recent months and the Reserve Bank of India reducing rates
should result in only a very gradual recovery in demand over the next 12 months," said Sher Mehta, director at Virtuoso Economics."As a
result, the pace of economic recovery and earnings growth is likely to be subdued over the next two years
This in turn should cap stock market gains over the next 12-month period and beyond."When asked what would most likely drive Indian stocks
over the next 12 months, a significant minority of respondents - 17 of 48 - said it would be a recovery in demand and 15 analysts said
global capital inflows.Foreign portfolio investors (FPIs) have turned net buyers of Indian equities after being net sellers in July and
Capital inflows in domestic equities touched a seven-month high in November, according to data from National Securities Depository Ltd
(NSDL)."Buying opportunity enthused FPIs (are set) to look into the Indian market
FPIs are expecting stable governance, and we are at the bottom of everything - whether it is GDP, unemployment or consumption
From here, improvements are expected," said KK Mittal, vice president at Venus India.Still, less than a fifth of strategists in the poll
said fiscal stimulus was most likely to be the major driver in gains over the coming year."The government is announcing stimulus time and
again, but the stimulus will not have an immediate impact on the economy or on consumption or investments," said Mittal.A separate Reuters
poll predicted the RBI would cut its key interest rate for the sixth consecutive time at its meeting next week and ease again next year,
which might provide a further boost to domestic equities.But the average price-to-earnings ratio is currently at a high not seen since at
least the turn of the millennium, and the recent surge in stock prices has raised concerns over their valuation."I see a selective downside
in stocks that have already moved up too much because of valuation concerns
We can see some correction due to valuation reasons in those stocks that have taken the market to an all-time high," said Rudramurthy B.V.,
managing director and research head at Vachana Investments.Get Breaking news, live coverage, and Latest News from India and around the world
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