Market watch: High likelihood of correction in equity markets over next few months [details]

Over the next few months, the possibilities of the Indian equity market present process a correction are excessive, mentioned a senior official of credit standing company Acuite Ratings & Research.

Going ahead, the market might even see sector particular momentum relying on components like international demand and uptick in personal sector investments, he added.

To a question whether or not the uptrend in the Indian inventory markets would proceed or come to an finish, Suman Chowdhury, Chief Economist and Head –Research informed IANS: “The Nifty (NSE 50 index) has yielded a return of 77.4 per cent over the final three years and even when one excludes the affect of the restoration from the pandemic, the one yr return on Nifty is at 14.5 per cent.”

This is increased than the returns in the developed markets for instance, the S&P500 has a 3 yr and one yr return of 40.1 per cent and 10.9 per cent respectively, he mentioned.

According to him, the superior efficiency of the Indian equity markets to date has been as a result of home demand resilience, macroeconomic and monetary system stability, the elevated participation of home retail buyers and the gradual return of the international buyers in the present calendar yr.

“With the energy of home demand together with the pent-up demand for providers, nicely supported by the step-up in the general public investments in infrastructure, India’s GDP progress stood sturdy at 7.2 per cent in FY23,” Chowdhury remarked.

While the medium to long run progress prospects for India will stay sturdy, the gross home product (GDP) progress will reasonable to six per cent in FY24 given the worldwide slowdown and a few lagged affect of increased rates of interest on the financial system, Chowdhury mentioned.

“There are additionally potential dangers rising from a resurgence in oil costs and a surge in the meals costs in sure classes which may reverse the gradual downtrend in the headline inflation and make the rates of interest keep increased for an extended interval. Further, there may be additionally some aspect of political uncertainty that’s related to the upcoming common elections next yr,” he added.

Indian firms have seen a powerful earnings progress over the final three years pushed by the restoration in demand and in addition the softness in commodity costs.

With the normalisation in demand and no additional profit from decrease commodity, sustaining a excessive earnings progress might be a problem for the company sector in FY24. While the common worth to earnings for Nifty has moderated, it’s nonetheless excessive at round 24, he mentioned.

“Given such a state of affairs, the likelihood of a correction in the equity markets over the next few months is excessive. Nevertheless, the market could witness sector particular momentum going ahead relying on components like international demand and uptick in personal sector investments,” Chowdhury concluded.

(With inputs from IANS)