Indian stocks will not recoup this year's losses anytime soon and 2020 will mark the worst annual performance in nine years on fears of a deep downturn in the economy and business activity, a Reuters poll of market strategists found.
Over 55% of 34 strategists who answered a separate question said the benchmark BSE Sensex Index would revisit this year's low of 25,638.90 hit on March 24. All but one said it would happen by the end of September.
While the index has recovered nearly 20% since hitting a record low - a day before the nationwide lockdown started on March 25 - it is still down around 26% so far this year.
That is despite $266 billion of economic stimulus announced by the government and the aggressive liquidity measures and interest rate cuts from the Reserve Bank of India.
The BSE index was forecast to gain 4.2% to 31,960 by the end of 2020 from Friday's close above 30,672, according to the median forecast from the latest poll. It was taken before the RBI's latest unscheduled meeting on Friday, where it cut the repo rate by another 40 basis points to a record low of 4.00%.
If the poll forecast is correct, that would leave the index down by 22.5% for this calendar year, its worst performance since 2011 and a massive downgrade from 43,560 predicted in the last Reuters poll three months ago.
While the BSE Sensex was then expected to climb to 35,500 by mid-2021, and to 38,000 by the end of 2021, it would still be well below the record high of 42,273.87 hit on Jan. 20 this year, before the first coronavirus case was reported in India.
"Indian equities now look fairly attractive compared to other emerging market equities. But a likely economic contraction this year and a slow recovery beyond that means potential gains (in stocks) will be limited," said Shilan Shah, senior India economist at Capital Economics.
Over 85% of strategists - 29 of 34 - who answered an additional question said the current macroeconomic backdrop and higher unemployment poses a "high" or a "very high" risk to their outlook for the next three months.
More than 60% - or 18 of 29 respondents - said corporate earnings performance would hit a trough in the current quarter or next.
"We believe the index can revisit the lows during the current quarter results season between June and August. The lockdown is going to have a severe impact on the earnings results and recovery will be very gradual from there on," said Jyoti Roy, equity strategist at Angel Broking.