India's main stock index is headed for only its third annual decline in a decade as renewed fears about the health of the global economy, along with high domestic inflation and rising interest rates, dent investor appetite, a Reuters poll showed.
The 30-share BSE Sensex is already down more than 18 percent since the start of 2011, making it one of the worst performers among its peers in emerging markets.
Analysts expect a revival in the coming months as normal monsoon rains in 2011 are widely expected to strengthen domestic consumption - but not enough to erase losses for the year.
The median forecast of 18 investment houses, brokerages and research firms sees the benchmark at 17,650 at the end of 2011 and at 19,500 by next June, in a poll taken over the last ten days. The index ended 2010 at 20,509.
That translates to a predicted 5.7 percent gain by year-end from Thursday's close of 16,698.
"The global events are changing everyday and India cannot remain shielded for long from what is happening globally," said Gajendra Nagpal, chief executive at Unicon Financial Intermediaries.
"Also the government policies back home are not really shaping up the way they should have so the India growth story is faced with several challenges," he added.
The government's reform agenda has been sidelined as it is distracted by a spate of corruption scandals, slowing key projects that would add capacity, ease bottlenecks in the economy and foster growth.
Fears over the escalating European debt crisis and worries the global economy will slip back into recession have hurt global markets in the past several months.
Global investors are shying away from riskier emerging markets and moving to beaten-down developed economies.
Meanwhile, India's headline inflation, at nearly 10 percent in August, remains way above the Reserve Bank of India's (RBI) medium-term comfort zone of 4-4.5 pct.
The RBI has been one of the world's most aggressive central banks, raising interest rates 12 times in 19 months and signalling it is not yet done with rate tightening, to combat stubbornly high inflation in Asia's third-largest economy.
Meanwhile, a recent slide in the rupee has stoked fears of rising imported inflation, which could further increase domestic price pressures.
If the Sensex drops in 2011, it will be the first fall since 2008 when it slumped 52.5 percent. The poll forecasts are more pessimistic than in a similar survey three months ago, when participants expected the benchmark to close 2011 at 19,750.
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