Despite a slowing economy, Indian equities will increase by 9% by the end of 2023, according to a poll

According to market experts surveyed by Reuters, India's stock market, which surged to a record high last week, is predicted to gain another 9% by the end of 2023 despite common projections of a gradual decline in the economy.

The benchmark BSE Sensex Index rose more than 23% from this year's low of 50,921.22 on June 17 to an all-time record high of 62,887.40 on Tuesday. Only India's stock index is at record highs out of the 17 stock indices that Reuters polls.

Growing domestic equities fund inflows from a relatively young populace willing to take risks have supported Indian shares. That helps to explain why India is now outpacing both other emerging markets and developed markets, along with expectations that most major central banks will scale back their interest rate increases.

However, a Reuters poll of 27 analysts, brokers, and strategists conducted from November 15 to 28 indicates that further gains until at least the middle of next year are likely to be muted.

The benchmark BSE Sensex Index rose more than 23% from this year's low of 50,921.22 on June 17 to an all-time record high of 62,887.40 on Tuesday. Only India's stock index is at record highs out of the 17 stock indices that Reuters polls.

Growing domestic equities fund inflows from a relatively young populace willing to take risks have supported Indian shares. That helps to explain why India is now outpacing both other emerging markets and developed markets, along with forecasts that most major central banks will scale back their interest rate increases.

However, a Reuters poll of 27 analysts, brokers, and strategists conducted from November 15 to 28 indicates that future advances until at least the middle of next year are likely to be limited.

Strong outperformance in 2022 was attributed to resilient growth and "sticky domestic flows," according to Societe Generale's Rajat Agarwal, an Asia stock analyst. But even though these indicators are still positive, a high valuation premium may cause an outperformance stop.

By mid-2023, the Sensex was expected to increase only 3.7% from its close on Tuesday of 62,681.84 to 65,000. By the end of 2023, the Sensex was expected to increase to 68,000, representing a gain of about 9%.

The index is only about 300 points below where analysts in a Reuters poll from a year ago predicted it would be by the end of 2022 with one month left to go.

The Nifty 50, which has also reached a record high, was predicted to rise 4.7% from its Tuesday closing price of 18,618.05 to 19,500 by mid-2023 and 20,500 by the end of the year.

However, most indicators suggest that the Indian market is overbought.

"Market valuations are expensive in absolute terms, relative to its own history and bonds," Goldman Sachs wrote in its most recent report, "Staying put as others catch up," noting that the Indian stock market was trading at a record premium to the rest of the region.

It is commonly anticipated that the third-largest economy in Asia will see a substantial slowdown soon.

According to a separate Reuters poll, the Reserve Bank of India has increased its main policy rate by a relatively modest 190 basis points since May to 5.9% and is widely anticipated to increase it by an additional 50 basis points by the end of March.

Nevertheless, a resounding majority of analysts in the most recent survey, 22 out of 25, predicted that corporate earnings would continue to rise in the months to come after strengthening in recent quarters.

Morgan Stanley claims to be bullish on stocks but believes that in 2023, Indian markets will underperform peers despite having been boosted by domestic buying.

According to Morgan Stanley analysts' most recent client note, "the seemingly easy call for 2023 is that emerging markets are likely to benefit from a relatively more benign world versus 2022, and given India's trailing outperformance and rich relative valuations, Indian equities will likely see a retracement of relative gains."