Indian stocks for first annual decline in seven years

A man speaks on his mobile phone past a new brand identity for Nifty Indices at 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 see their first annual decline in seven years in 2022, as higher interest rates and weakening growth prospects reduce the chances of a quick recovery from this year’s already sharp decline, a report found. Reuters poll.

Rising inflation in India and around the world, with frayed supply chains made worse by Russia’s invasion of Ukraine, has prompted most central banks to raise interest rates, triggering significant outflows of risky assets.

India’s benchmark BSE Sensex (.BSESN) is down nearly 7% so far this year and around 12% since its year-on-year high of 61,475.15 on January 18, a level not expected to recover anytime soon.

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That performance still beats that of the MSCI all-country world index (.MIWD00000PUS), which is down more than 16% for the year and came dangerously close to a bear market earlier this month, defined as a loss of 20% or more. Lake.

The Reuters survey of 30 stock strategists, conducted May 13-24, predicted that the BSE Sensex will make up for less than half of its recent losses and gain just 3.2% to 56,000 from closing price by the end of 2022. from 54,288.61 Monday.

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

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

“On the one hand, there are the headwinds coming from expectations of further rate hikes, and on the other hand, earnings growth momentum is slowing.”

While the BSE Sensex was projected to recover from losses incurred so far and hit 60,000 by the end of 2023, analysts predicted a lot of short-term volatility.

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

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

In fact, more than 80% – 22 out of 27 – of equity strategists who answered a separate question said the broad decline in Indian stocks would last at least three months.

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

The Reserve Bank of India delivered a surprising 40 basis point off-cycle rate hike on May 4, with more hikes likely in the coming months, but lagging behind many other central banks in the current tightening cycle, including the US Federal Reserve. the chance of further capital outflows.

Foreign portfolio investors have already dumped nearly $21.4 billion in Indian stocks this year, nearly double the net outflows of about $12 billion during the 2008 global financial crisis, the highest annual withdrawal in at least 20 years.

(Other stories from the Reuters Q2 global stock market poll package 🙂

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Reporting by Indraip 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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