Switzerland's stock market dived after its central bank de-pegged its currency from the euro, but it's not time to go bargain hunting yet, analysts said.

"Don't try to catch a falling knife," Societe Generale (Euronext Paris: GLE-FR) warned in a note Friday, advising instead that investors whose base currencies are the U.S. dollar or the euro should be taking profit. It cut its "already pessimistic" target for the SMI index (Swiss Exchange: .SSMI) to 7500 by year-end from 8500. On Monday, the SMI closed at 8152.78, up 3.2 percent from Friday's close, but still down over 11 percent from before the Swiss National Bank's (SNB) surprise move to end its more than three-year-old currency peg of 1.20 Swiss francs to the euro.

Combined with an interest rate cut deeper into negative territory - by 50 basis points to negative 0.75 percent - the move saw the Swiss franc surge against the euro and the dollar. After three years of hovering around 1.20 francs, the euro plunged (Exchange:EURCHF=) Thursday, fetching as little as 0.8588 franc, although it's since recovered to around 1.02 francs in Asian trade Tuesday.

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"Expect earnings momentum to be negative: first on exporters, which will immediately feel the pain of currency appreciation, and then on the domestics companies (including small caps) which will likely suffer from deflationary forces," Societe Generale said.

It also expects Swiss companies will begin slashing their dividend payouts from the current average 54 percent payout ratio, noting that the around 3 percent dividend yield had been a key draw for the market as its sovereign bond yields were negative.

In addition, despite the correction, Switzerland's stock market still has the highest price-to-book valuation in Europe, it noted.

Bearishness spreading

While Societe Generale is only sending its view deeper into bearish territory, Jefferies is reversing a three-year-old bullish call, downgrading the market to "Bearish."

"While we think that the negative interest regime is probably a better tool in dealing with deflation, a strong currency will disproportionately hurt the multinational earnings within the index," Jefferies (:JEF) said in a note last week. It expects multinationals' earnings will be "suffocated" by the strong franc. "The change in the value of the Swiss franc will be most felt by exporters, the tourist industry and those who have borrowed in the currency offshore."

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Moody's is also concerned, noting that around 45 percent of Switzerland's goods exports go to the euro area, which just saw its purchasing power against the franc take a bath.