US investment house JP Morgan has warned a bull run by Indian stocks is in jeopardy with New Delhi failing to deliver on promised reforms and economic indicators deteriorating.
The Indian stock market has moved up sharply since June when Pranab Mukherjee -- perceived as hostile to economic reforms -- quit as finance minister to run for the largely ceremonial post of president.
"The first volley of reforms was expected after the presidential poll in late July. But that has not been the case," JP Morgan said in a report late Friday.
Mukherjee's replacement, veteran politician P. Chidambaram, known for his strong pro-market views, had pledged to move to restore investors' faith in Asia's third-largest economy and "restart the growth engine".
But the government's "coalition allies continue to be reluctant on key reforms" while investor concern is mounting with parliament paralysed over potential corruption in the allocation of coal fields to private firms, the report said.
"Bulls are now getting edgy," noted the JP Morgan report.
On Friday, the Congress party-led government's biggest ally, the Trinamool Congress, reiterated its opposition to foreign direct investment in any sector, including retail, aviation, pensions and insurance.
Warnings this week by the central bank that the government may miss its budget-deficit target amid higher spending on fuel subsidies and sharply slowing economic expansion are also fanning investor concern, analysts say.
After plunging over 25 percent in 2011, India's benchmark Sensex Index has gained around 15 percent so far this year, outperforming most of the global indices due to low stock valuations and bargain-hunting.
Indian stocks fell 0.38 percent to end Friday at 17,783.21 after four weeks of gains.
"I think we are presented with a situation where it would be very difficult to expect a runaway market from here," Ved Prakash Chaturvedi, senior analyst at L&T Finance Holdings, told India's Moneycontrol financial portal.