10% GROWTH FOR INDIAN STOCK MARKET

Brokerage Credit Suisse today said it is retaining its "overweight" call on domestic stock markets despite the risks emanating from forthcoming general elections and said it sees a full 10 per cent upside this year. The brokerage said it is retaining the overweight call, as within a month the market gained 3.5 per cent despite the looming risks from an early election and being a crowded market. Basing its optimism on potential rate cuts by the RBI, the report says the rate cuts will be the catalyst for the upsides to the market, which according to its strategists are a potentially 10 per cent further upside. "While there is certainly election risk, we believe it could be more of a positive catalyst given the corruption allegations and other reported scandals relating to the current administration," Credit Suisse said. The optimism also comes from the steady decline in inflation readings, it said, adding if one uses the 3-month moving average, the headline inflation has slowed from 9.3 per cent 12 months ago to 6.5 per cent six months ago and to 4.3 per cent currently. "While we acknowledge that this market looks crowded among foreign investors. But this market has been historically been even more crowded than is the case currently and has still managed to outperform during that period. "On a rolling 12 month basis, cumulative net foreign buying in India is currently 2 per cent of market capitalisation but, for most of 2003-04, it was running at between 2 and 4 per cent of market capitalisation." It also bases it optimism on the fact that the MSCI India index outperformed the region over most of this period, gaining 3.5 per cent in April alone and 3.2 per cent since joining the 'Cheapest 4 Club'. In March, India joined the Cheapest 4 club for the 15th time since 2000. Shanghai and India joined the Cheapest 4 club, replacing MSCI Hong Kong and Australia.