Credit Rating Information Services of India Ltd (Crisil)
has warned that Indian stocks are beginning to look expensive
in a pan-Asian context and that a significant correction
is likely by the end of the year.
view expressed by the Crisil Centre for Economic Research
may be seen in the context of steady escalation in the
stock market indices, as seen in recent times and evident
from large inflows into stock exchanges.
believe a correction is likely to take place in December,"
says Abheek Barua, a senior economist with Crisil, indicating
that the market will probably behave cautiously from now.
"There will be profit-taking at each up move."
rating agency, in its midyear outlook for 2003-04, noted
that the Indian bourses have been on a roll since April
this year. Stocks of public sector units have led the
rally following which economy-sensitive sectors such as
banking took over.
moves were driven by an economy that was backed by improving
corporate results. However, the information technology
segment was faced with pressures on margins and an appreciating
currency lagged behind in the early stages though positive
news flows in more recent months led to some improvement.
rally was entirely driven by institutional investors with
FIIs [foreign financial investors] taking the lead. FII
interest in debt investment waned and was replaced by
growing interest in equities... India was close to the
top of the Asian emerging market league tables with only
Thailand and Indonesia faring better," says Crisil.
this context, however, the agency has underlined its feeling
that the pace of the rally will "slacken" considerably
going forward. In December, there will be the usual yearend
profit booking by FIIs. An upside of around 10 per cent
in equity indices from their current levels in the short
run is expected.