By Vivek Mishra
BENGALURU (Reuters) – India’s battered benchmark stock indices are set for a slow and partial recovery this year from their worst consecutive monthly rout in nearly three decades, according to a Reuters poll of equity analysts who were far more pessimistic than three months ago.
The blue-chip Nifty 50 index has sunk about 14% from its all-time high in late September 2024 and after five straight months of losses, including February, is teetering on the edge of its longest losing streak since July-November 1996, when it plunged more than 25%.
Economic growth in Asia’s third-largest economy slowed sharply this fiscal year as high inflation and stagnant incomes squeezed household spending.
That has dented corporate profits and triggered a $25 billion foreign investor sell-off since October, flipping Asia’s top-performing stock index to one of the worst.
A weakening rupee, hitting record lows nearly every other day, has made India’s already expensive stock market even less attractive, further dimming hopes of a quick rebound.
The Nifty 50 index is forecast to rise more than 6% to 24,000 by mid-2025 from Tuesday’s close of 22,547.55 and reach 25,689 by end-2025, the February 13-26 poll of 25 analysts showed. Forecasts ranged from 19,000, signifying a 16% drop, to 28,800, a 28% rise, by end-2025.
The BSE Sensex is expected to climb to 78,500 by mid-2025 and 80,850 by end-2025, still well below its all-time high of 85,978.25 reached in September, the poll showed.
Those marked the first downgrades since the November 2023 survey. A majority of analysts – 16 of 23 – said another correction in the next three months was unlikely, while the other seven said it was likely.
‘GRADUAL RECOVERY’
“The high growth we saw last year was never built to last – that was clear after the (July-September) GDP and earnings numbers. Markets will recover gradually after bottoming out in March, but let’s be real: that’ll be driven by buy-the-dip trades and selling exhaustion. I don’t see us returning to last year’s highs soon,” said Yogesh Kalinge, associate director of research at A.K. Capital Services.
Kalinge was among only about one-quarter of analysts polled by Reuters in August 2024 who predicted a market correction in the following months.
“Valuations remain stretched, corporate earnings won’t stage a comeback when consumption is still sluggish and on the growth front, nothing has truly improved. However, with time, markets could see a gradual recovery,” he added.
Nifty 50 companies have reported only 5% earnings growth last quarter, the third straight quarter of single-digit gains after two years of strong double-digit expansion.
Asked how corporate earnings growth in 2025 would compare to last year, 15 of 24 analysts said it would be slower and nine said faster.
“Inflationary pressures and rising unemployment may weigh on export-driven sectors like IT, pharma and specialty chemicals. Stress in retail loans, especially unsecured credit, is emerging as a risk,” said Ajit Mishra, senior vice president of research at Religare Broking.
Finance Minister Nirmala Sitharaman’s February 1 budget introduced tax exemptions on annual income up to 1.2 million rupees and there are expectations for modest easing by the Reserve Bank of India this year to boost household consumption.
However, several analysts in the poll were sceptical about its immediate impact on consumer spending and corporate earnings.
“Until that reflects in company revenues, it’s just a feel-good factor from the budget. Real change takes time – people don’t just alter their spending habits overnight,” said Anil Manghnani, director at Modern Shares and Stockbrokers.
“The RBI is expected to cut rates further to push growth. If rates are falling, that’s more worrying. It means demand is weak… Markets should recognize this reality, but they won’t. After all, the stock market runs on greed and fear.”
(Other stories from the Reuters Q1 global stock markets poll package)
(Reporting by Vivek Mishra; Polling by Susobhan Sarkar and Vijayalakshmi Srinivasan; Editing by Hari Kishan, Ross Finley and Gareth Jones)
