Equity Gains In India To Be Limited In 2020 As Economy Slows: Reuters Poll

The expected rise in stocks in the poll of 50 strategists would be half the rally this year


BENGALURU: The stock markets are set to rise 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. It has gained over 13% in the past two months and repeatedly set record highs after the government announced several measures, including a 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 August. Capital inflows in domestic equities touched a seven-month high in November, according to data from National Securities Depository Ltd (NSDL).