Forecasts for BSE Sensex trimmed, but rise seen into 2016 - Reuters poll

By Kailash Bathija

BENGALURU (Reuters) - India's benchmark stock index, the BSE Sensex, is set to climb this year, although not by as much as forecast three months ago, and it will be up about 18 percent in a year's time even if U.S. interest rates rise as expected, a Reuters poll found.

The poll was conducted last week, before negotiations between Greece and its creditors broke down, setting the stage for a probable Greek debt default this week. The developments roiled financial markets on Monday.

Equity analysts, who are generally bullish on India, forecast the Sensex would reach 30,500 by the end of 2015, below the 32,000 consensus in a similar poll in March.

They forecast a further rise to 32,850 by end-June 2016, up from Friday's close of 27,811.84.

The Indian stock market was among the world's best performers last year, rising almost 30 percent.

But after hitting a lifetime high of 30,024.74 in March, the Sensex declined more than 7 percent. The absence of promised reforms and fears that a poor monsoon would push up food price inflation drove foreign institutional investors to sell.

Strategists were split over whether these investors would continue to pull out if the U.S. Federal Reserve raised interest rates later in the year as expected. Ten of 18 strategists said they would.

In 2013, Indian stocks suffered a steep sell-off when the Fed announced it would reel in its economic stimulus. However, a majority of analysts did not expect any significant correction this time.

"People have already understood that it is going to happen somewhere down the line. You might see a reaction to the event, but beyond that, the market will stabilise and it will come back," said Deven Choksey, chief executive officer at KR Choksey, an investment firm in Mumbai.

Early indications of good monsoon rains and relatively good economic growth compared to that of rival countries will make India more attractive to foreign and local investors, analysts said.

Better-than-expected rains will hold down inflation and may give the Reserve Bank of India (RBI) room to cut interest rates further this year. [RBI/INT]

RBI Governor Raghuram Rajan has already delivered three rate cuts as inflation has been subdued.

India's economy grew 7.5 percent year-on-year in the quarter ending March, outpacing growth in China, although many, including Rajan, are sceptical about a data revamp that may have flattered India's figures.

(Editing by Alan Raybould)