RIADA Stockbrokers is forecasting a fairly flat performance from the Irish stock market over the coming months, suggesting that the ISEQ index can only make modest gains between now and the end of 1997.

According to its latest equity market strategy report, the brokers point to a fairly modest rise from current levels, predicting that the Dublin market will gain, at best a further 6 per cent by year end, hovering around the 3,200 mark.

The ISEQ has this week traded at over 3,162.93, a new record level. But the brokers believe that, many of the factors driving the Dublin market have now "matured" and that activity from here on in may be relatively flat.

Riada is also ruling out any further EMU-led rallies in the bond market in the months ahead while projected earnings growth will be more modest than in recent years, the report states.

The brokers are signalling some further weakness in the Irish currency, which should boost overseas earnings and profit translation for many Irish companies, particularly those in the industrial sector.

With company balance sheets looking strong, Riada is also indicating that there may be some scope for some possible earnings upgrades for some companies', mainly through acquisitions.

The liquidity situation seems set to remain favourable with strong domestic cash flow continuing and little call for funding in the market.

The performance of banks and other financial stocks, it states will be constrained by rising bond yields in the coming months. But despite its cautious stance on the sector, it singles out AIB as having "some scope" to catch up on Bank of Ireland.

The leading industrials will make little progress this quarter, according to the report, but Waterford Wedgwood could move ahead.

Smurfit, it says, "could tread water" for some time to come, but the brokers expect it will outperform the sector in the second half of the year. Second line stocks, particularly those with high overseas earnings and good exposure to the British market, should also do well.

The report also forecasts a closer correlation between the Irish and other European markets over the coming months, with factors such as the weakening Irish currency helping to buoy the market. "A weaker Irish pound will obviously be beneficial for the equity market, particularly the industrials, which have a significant proportion of earnings originating overseas."