Indian stocks will get cheaper: Report

Indian stocks,Asias worst performers this year,are likely to become cheaper relative to Asian equities amid a slowdown in economic growth and global concerns such as higher oil prices,Credit Suisse Group AG said.

Indian stocks,Asias worst performers this year,are likely to become cheaper relative to Asian equities amid a slowdown in economic growth and global concerns such as higher oil prices,Credit Suisse Group AG said.

Valuations,based on measures including price-to-book and return on equity,need to narrow 15 for the brokerage to raise its underweight rating on the country,Ashish Gupta,head of India research,told reporters at an investor conference organised by Credit Suisse in Hong Kong on Monday. He didnt provide specific figures.

A 13 slump in the Bombay Stock Exchange Sensitive Index this year has reduced the average valuation of its shares to 16.8 times estimated profit. Thats within 5 of the lowest level since June 2010. The Sensex,the worst-performing major Asian gauge in 2011,still trades at a 33 premium to the MSCI Asia Pacific excluding Japan Index.

India for the past few years has consistently maintained a high premium relative to the rest of the region, said Gupta. We see this premium coming increasingly under pressure.

The Reserve Bank of India increased rates on March 17 for an eighth time in a year to cool prices fueled by economic growth exceeding 8 the past four quarters. The central bank raised the repurchase rate,the rate at which it lends to banks,by 0.25 percentage point to 6.75,as forecast by all 26 economists in a Bloomberg survey. The central bank raised its March-end inflation forecast to 8 from 7,according to a March 17 statement. A 12 jump in oil this year amid mounting violence in the Middle East and North Africa has escalated the risk of price pressures in Asia. South Korea,Thailand and Vietnam have increased borrowing costs this month. Oil prices are likely to stay firm,which does not augur well for the Indian market, Gupta said.

India relies on imports to fulfill three-quarters of its annual energy needs. The nations fight against the fastest inflation in six years will continue as the country assesses the effect of higher crude oil costs,Kaushik Basu,the chief economic adviser in the finance ministry,said March 10.

Gupta repeated Credit Suisses forecast that the Sensex may drop to 16,000 in coming months. The brokerage has a 12-18 month fair value prediction of 21,000,he said. The measure dropped 0.2 to 17,841.52 as of 2:56 p.m. in Mumbai.