According to Niket Shah, senior group vice president and fund manager at Motilal Oswal Asset Management Company, by December we should be very close to a new high.
Several analysts pointed on corporate earnings as a catalyst for short-term declines in addition to increasing interest rates.
While some investors are feeling cautious due to dismal company profits and a concern about rising interest rates, others have long-term faith in Indian shares. Others predict that the Nifty 50 index of the National Stock Exchange will reach a new high by the end of 2023.
On December 1, 2022, the 50-stock index reached a lifetime high of 18887.60 points.
“Although the index has built in numerous challenges in the process, the present situation is fairly similar to that of the CY13, CY16, and CY18 phases,” the brokerage company stated. In each of these instances, higher base building took three to four months and retraced the prior upmove by 50-60%, followed by the index testing new highs in the following quarter.”
“I believe we will be very close to a new high by December,” said Niket Shah, senior group vice president and fund manager at Motilal Oswal Asset Management Company.
A lot of the negative news, such as inflation, rural slowdown, and weak earnings growth, are being discounted in the market at this point, so there may be a short-term selloff, but we are very close to bottoming out of the consolidation phase that the market has been in for the last 18 months, he said.
Nonetheless, Shah expects that a post-election surge in October and the expectation of rate reduction through early 2024 will help indexes reach new highs.
The most recent minutes of the Federal Open Market Committee in the United States triggered market concern that officials there may be inclined to raise interest rates by 50 basis points.
Apart from increasing interest rates, other investors cited corporate profits as a reason for short-term declines.
“Earnings trend remains a little underwhelming due to ongoing margin pressures and weak demand. The predictions for profits growth are currently leaning towards low double-digit levels and are proving to be more and more flimsy, according to analysts at Dolat Capital Market.
The letter said, “The MPC (monetary policy committee of the Reserve Bank of India) will now probably contemplate another rise in its April meeting, which was previously a pause in our base assumption. As a result, lending rates will exceed what we consider to be the critical level for durables and mortgages.
With the US Federal Reserve tightening and China reopening, BNP Paribas Securities India anticipates pressure on international flows as well as pressure on local flows from rising term deposit rates.
According to Jefferies, India’s underperformance in comparison to other emerging markets may soon come to an end. The international brokerage said that over the previous ten years, the Nifty 50 has, on average, traded at a higher price to earnings premium than counterparts in developing countries. India’s PE premium reached a peak of 101 percent due to its tremendous outperformance from October 2021 to 2022, but since then, as a result of India’s underperformance, the PE premium has swiftly returned to ordinary levels, the report said.
