Indian stocks unlikely to recoup recent losses: Poll

Like most emerging markets, Indian stocks have witnessed a heavy outflow of foreign investment - a key driver for domestic equities - over the past two months as expectations of tighter monetary policy across the globe pushed major bond yields higher.

Yields on the U.S. two-year Treasury note, which reflects short-term interest rate expectations, hit their highest level since March 2020 last week before their steepest daily fall in 20 months on Friday.

The Reserve Bank of India is forecast to hike its repo rate by 25 basis points in Q2 2022, its first increase in more than three years, lagging peers such as the Central Bank of Brazil and the South African Reserve Bank.

Nearly three-quarters of respondents to an extra question, 25 of 35, said a correction in Indian equities was likely over the coming six months, with the median at 10%.

"We could see a 5-10% correction for Indian markets as valuations adjust to the moderation in earnings momentum. The market also remains sensitive to risk for EM equities from strong (U.S.) dollar and higher bond yields," said Rajat Agarwal, Asia equity strategist at Societe Generale.

Despite those downside risks, all but two of 35 strategists said corporate earnings would improve further over the next six months. That view was largely driven by expectations of a strong rebound in economic growth.