Mumbai: Sensex may fall to a 10-month low of around 13,000 points by end-2008, as the Reserve Bank of India may raise interest rates to check inflation due to record oil prices, Credit Suisse said on Monday.
"The market is still not pricing in the much lower earnings growth being forecast by corporates and banks," Nilesh Jasani, head of research at the Indian unit of the Swiss bank said at a briefing.
Shares fell as much as 2.5 per cent on Monday on top of a 5.1 per cent decline last week and has shaved off a quarter of its value so far in 2008 as foreigners sold $4.8 billion worth of stocks amid concerns of rising inflation and slowing growth.
They bought $17.4 billion of stocks in 2007, pushing up the main index by 47 per cent.
It was at 15,191 points on Monday.
Uncertainty ahead of Lok Sabha elections will also weigh on the minds of investors, Jasani said.
While the government expects the economy to grow by around 8.5 per cent in 2007/08, many research houses expect Asia's third-biggest economy to expand at less than eight per cent as the impact of previous policy tightening starts to show.
Jasani expects the rupee to remain weak in the current year, pressured by a widening current account deficit and expects inflation at 9-9.5 per cent by September.
The Rupee has fallen more than eight per cent in this year, hitting a 13-month low of 43.21 last month, forcing policymakers to ease offshore borrowing regulations for local firms and the RBI to intervene in the currency market.
"Every one per cent depreciation in the rupee accounts for a 15 per cent rise in the deficit bill, so we assume the government will want the currency to stop depreciating some time," he said.
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