Indian stocks at risk of 'de-rating': BofA-Merrill Lynch

"While valuations are below long term averages, the market has been de-rated as India's growth momentum is at 10-year low and the twin deficits too are the worst in over a decade," BoA-ML analysts say.

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The bank adds "a meaningful recovery" is unlikely until the government undertakes reforms.

But BoA-Merrill adds oil prices could provide near-term relief, saying a USD 10 per barrel decline in oil reduces India's current account deficit by 0.4% of GDP and the fiscal deficit by 0.2% of GDP.

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