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 India's stock market, which rallied to a record high this week, is forecast to rise another 9% by the end of 2023 despite widespread expectations of a gradual slowdown in the economy, according to market experts polled by Reuters.

The benchmark BSE Sensex Index touched an all-time record high of 62,887.40 on Tuesday, surging more than 23% from this year's low of 50,921.22 hit on June 17. Among the 17 stock indices which Reuters polls on, only India's are at record highs.

Indian shares have been driven by growing domestic equity fund inflows from a relatively young population keen to take risks. Twinned with expectations that most major central banks will slow their interest rate hikes, that partly explains India's surge ahead of both emerging market peers and developed markets.

However, further gains until at least the middle of next year are likely to be muted, according to the Nov. 15-28 Reuters poll of 27 analysts, brokers and strategists.

"Resilient growth and...sticky domestic flows all contributed to strong outperformance in 2022," said Rajat Agarwal, Asia equity strategist at Societe Generale. "But with a high valuation premium, we could likely see a pause in outperformance even as these factors remain supportive,"

The median forecast showed the Sensex gaining only 3.7% from Tuesday's close of 62,681.84 to 65,000 by mid-2023. The Sensex was then forecast to rise to 68,000 by end-2023, for a total gain of around 9%.

With one month to go, the index is only about 300 points below where analysts in a Reuters poll one year ago said it would be by end-2022.

The Nifty 50, which has also hit a record high, was forecast to gain 4.7% from Tuesday's close of 18,618.05 to 19,500 by mid-2023, and reach 20,500 by end-2023.

But by most measures, the Indian market looks overbought.

In its latest report titled "Staying put as others catch up", Goldman Sachs wrote "market valuations are expensive in absolute terms, relative to its own history and bonds", adding that the Indian stock market was at a record premium against the rest of the region.

Asia's third-largest economy is widely expected to slow significantly in coming months.

The Reserve Bank of India has raised its key policy rate a relatively modest 190 basis points since May to 5.9% and is widely expected to add another 50 basis points by end-March according to a separate Reuters poll.

Still, a clear majority of analysts in the latest survey, 22 of 25, said corporate earnings would improve further over coming months after strengthening in recent quarters.

Morgan Stanley says it is bullish on equities but reckons Indian markets, which have been driven higher mainly by domestic buying, will underperform peers in 2023.

"The seemingly easy call for 2023 is that emerging markets are likely to benefit from a relatively more benign world versus 2022, and given India's trailing outperformance and rich relative valuations, Indian equities will likely see a retracement of relative gains," Morgan Stanley analysts wrote in its latest client note.