MARKET UPDATES: According to equities strategists surveyed by Reuters, the Indian equity market will grow less this year than anticipated due primarily to predictions of increasing interest rates. These strategists also stated that the likelihood of a correction in the near future was low.
The benchmark BSE Sensex Index increased by more than 4% in 2022, placing it among the top performers among peers who primarily saw double-digit losses. This was accomplished against a superior economic growth projection for this year and next year compared to several key competitors.
The market is down about 2% so far in 2023, mostly unaffected by the reopening of China's economy and a brighter outlook for the world economy. Nevertheless, the trend reversed late last year.
A negative study by American short-seller Hindenburg Research has caused uncertainty regarding a dramatic sell-off in shares of conglomerate Adani Group, which has caused capital outflows from the Mumbai market.
Although while an improvement in investor mood is anticipated over the next several months, a dramatic rebound doesn't seem realistic, in part because of rekindled concerns of rising interest rates in India and elsewhere.
At the same time, 17 out of 25 analysts clearly agreed that there was little probability of a reversal in the coming three months. "Since October, Indian shares have underperformed their EM (emerging market) rivals by a significant margin. Despite the valuation premium to developing equity peers declining, foreign investors have not returned as a result "said Rajat Agarwal, a Societe Generale equities strategist for Asia. Values are still above the historical average, and consensus profit projections are, in our opinion, overly optimistic.
The Sensex was expected to rise by about 5% from Wednesday's finish of 59,744.98 to 62,610 by mid-year, down from the 65,000 projected in November, according to the consensus prediction of 28 equity strategists. The Feb. 10–22 poll revealed that it was anticipated to increase by another 4% to reach 65,000 by the end of the year.
In comparison to the predictions of 19,500 and 20,500 made three months ago, the Nifty 50 index was anticipated to rise by around 5.2% from Wednesday's finish of 17,544.30 to 18,450 by mid-2023 and 19,000 by the end of 2023. Markets are currently anticipating that most significant central banks, including the Reserve Bank of India (RBI) and the U.S. Federal Reserve, will raise interest rates to higher peaks than anticipated just one month ago. As a result, the likelihood of a rate cut by year's end has significantly decreased, which has also kept the market in check.
According to analysts polled by Reuters, the RBI would raise its repo rate by 25 basis points to a peak of 6.75% in April before pausing till the end of 2023. This prediction was upped from 6.50% in a poll conducted just last month. The majority of respondents (19 out of 22) to a separate question in the most recent poll claimed that the Adani Group allegations had little to no effect on investor trust in Indian corporate governance.
Shilan Shah, deputy chief emerging market economist at Capital Economics, stated that "foreign outflows from Indian equity markets have been small and corporate bond spreads have not widened to any degree, suggesting that investors are not especially worried about corporate risks on a systematic level."
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