POLL - Indian shares to fall 16 pct in 2008 despite H2 rebound

By Sumeet Chatterjee

BANGALORE (Reuters) - Indian shares are likely to rise from current levels by the end of 2008 but are expected to end the year down 16 percent, ending a six-year bull run that saw the market rise more than six-fold, a Reuters poll shows.

The global credit crisis, rising inflation, high oil costs, slowing growth and foreigners turning net sellers of stocks after record inflows in 2007 have all undermined market sentiment.

The Bombay Stock Exchange's main 30-share index is seen at 17,000 by end-2008, down 16.2 percent on the year, the median forecast of 16 Indian and European analysts showed. However, that is 9.2 percent above Friday's close of 15,572.2.

By mid-2009, the index is expected to have risen to 19,000, 22 percent above Friday's close but still 6.3 percent below where it finished last year.

The majority of analysts in the poll said the market had not yet seen its bottom for 2008, with some expecting the main index to fall as low as 14,500 over the next couple of months before rebounding.

"There are real fears of high inflation and slowing growth in the Indian economy, which is not good news for any developing economy," said Gajendra Nagpal, chief executive of Unicon Financial in New Delhi.

The annual inflation rate hit 8.24 percent in end-May, its highest in more than 3-1/2 years, propelled by high global oil and food prices.

Economists expect annual inflation to hit 13-year highs above 9 percent in June following an increase of about 10 percent in state-set petrol and diesel prices, effective from June 5.