Indian stocks set for first annual decline in seven years

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A man talks on his mobile phone in front of a new brand identity for Nifty Indices inside the National Stock Exchange (NSE) building in Mumbai, India May 28, 2019. REUTERS/Francis Mascarenhas

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BENGALURU, May 25 (Reuters) – Indian stock markets will register their first annual decline in seven years in 2022 as rising interest rates and weaker growth prospects reduce the chances of a quick rebound from the already tumble brutal this year, according to a Reuters poll.

Soaring inflation in India and around the world, with frayed supply chains made worse by the Russian invasion of Ukraine, prompted most central banks to start raising interest rates, triggering a large outflows of risky assets.

India’s benchmark BSE Sensex index (.BSESN) has fallen almost 7% so far this year and around 12% since this year’s peak of 61,475.15 on January 18, a level the index is not expected to recover any time soon.

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This performance is still better than that of the MSCI All Country World Index (.MIWD00000PUS), which is down more than 16% for the year and which earlier this month came dangerously close to a bear market, defined as a loss of 20% or Continuation.

The Reuters poll of 30 equity strategists, which was conducted May 13-24, predicts the BSE Sensex will recover less than half of its recent losses and gain just 3.2% to 56,000 by the end. of 2022 from Monday’s close of 54,288.61.

If it materializes, the annual decline of about 4% would be its first annual loss since 2015.

“There are no clear signs of volatility easing in Indian markets in the near term,” said Rajat Agarwal, Asia equity strategist at Societe Generale.

“At one end are headwinds resulting from expectations of further interest rate hikes, and at the other end, earnings growth momentum is slowing.

While the BSE Sensex was expected to recoup its losses so far and reach 60,000 by the end of 2023, analysts predicted high volatility in the near term.

More than 70% of respondents, 19 out of 27, who answered an additional question said domestic stock market volatility would increase over the next three months.

Seven said it would increase significantly, while 12 expected a slight increase. The other eight said there would be a decrease.

Indeed, more than 80% – 22 out of 27 – of equity strategists who responded to a separate question said the general decline in Indian stocks would last at least another three months.

Most analysts warned that the negative outlook was largely due to rising interest rates.

The Reserve Bank of India announced a surprise off-cycle rate hike of 40 basis points on May 4, with further hikes likely in the coming months, but it lags many other central banks in the cycle. current tightening, including the US Federal Reserve, increasing the chances of further capital outflows.

Foreign portfolio investors have already sold nearly $21.4 billion of Indian stocks this year, almost double the net outflow of about $12 billion during the 2008 global financial crisis, the annual withdrawal the higher for at least 20 years.

(Other stories from the Reuters Q2 Global Stock Market Poll Brief:)

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Reporting by Indradip Ghosh; Poll by Arsh Tushar Mogre and Md Manzer Hussain; Editing by Ross Finley and Paul Simao

Our standards: The Thomson Reuters Trust Principles.

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