Britain's FTSE 100 index of leading shares is seen regaining only some of the ground lost in 2008's dramatic crash as the economy gradually emerges from recession over the coming year, a Reuters poll showed.
The quarterly poll of 13 strategists, taken over the last week, gave median forecasts for the FTSE 100 of 4,600 by the end of this year, up from a close of 4,294.03 on Monday and making a 3.7 percent rise since the start of the year.
"There is evidence to the effect that the green shoots are actually going to transform into a fully fledged recovery by the time we get in to the final quarter of the year," said Mike Lenhoff at Brewin Dolphin, who sees the index at 5,000 by end-December.
Next year will follow a similar steady path, with median forecasts showing the FTSE at 4,800 by next June, suggesting a 4.3 percent rise from where analysts believe it will end this year.
"The economies are going to start picking up, quantitative easing is starting to work … but I do think it is going to pick up slowly," said Robin Webb at broker Fyshe Horton Finney, who sees the index at 4,700 in a year.
The FTSE index sank 31 percent last year as global markets plunged in the face of a financial crisis that has sent major economies into recession. The downturn came after an 11 percent rise in 2006 and a 3.8 percent upturn in 2007.
The last poll, taken in March just after the index plunged to a six-year low, forecast the FTSE ending this year at 4,475. Forecasts in the most recent poll ranged widely from 3,800 to 5,000 for year-end.
BANKING TO LEAD
The UK's banking sector, the backbone of the British economy, has taken a battering, with massive asset writedowns and a drying up in lucrative merger activity. The sector has underperformed the FTSE by around 21 percent over the past 12 months.
London has seen few initial public offers (IPO) on the bourse this year after IPO business, once a big earner for banks, came to a virtual standstill last year.
But the banking sector could also be behind the recovery.
"The cyclicals and financials, they were the sectors that led the market on the way up, and I think they will be involved in phase two of any rebound," Lenhoff said.
"Some of the laggards could do quite well, like the telecoms sector, there is a lot of value in that sector now, and I think something like Vodafone could do quite well."
Shares in Vodafone, the world's biggest mobile phone company by revenue, have lost around 15 percent of their value since the start of the year.
British housebuilders have also borne the brunt of a tumbling housing market, with shares in Persimmon and Taylor Wimpey sliding as profits crashed. Britain's economy entered recession at the end of last year for the first time since the early 1990s, and contracted at 2.4 percent in the first three months of 2009, its fastest fall in over 50 years.
It is seen contracting 3.9 percent this year and is not expected to see any growth until the last quarter.
The Bank of England has slashed 450 basis points from interest rates since October, putting them at just 0.5 percent, and the bank has begun quantitative easing, effectively printing money, in an effort to boost the flagging economy.
