MUMBAI: With a slew of negative factors-domestic as well as global-weighing down the benchmark indices in India, the question that's on everyone's mind is: where is the market headed over the next few months? And if it goes southward, what could be done to change the expected slide?
Top investors like Rakesh Jhunjhunwala have indicated that the NSE nifty could fall to 4,800-5,000 level over the next few months, a decline of 10-12% from the current levels. Similarly, experts have downgraded most companies and technical analysts see over 10% correction in the benchmark indices. The feeling on Dalal Street is that if the government starts moving on the policy front, the sentiments could be reversed. Jhunjhunwala had recently told TOI in an interview that reforms in retail and insurance are imperative at this juncture.
Top broking house officials TOI spoke to say that with bearish undertone setting in the developed markets like the US and Europe, there is enough money waiting to enter emerging markets, including India. But it would need at least some triggers for the flows to start.
"Our interactions with investors indicate that surely there is money waiting on the sidelines to enter the (Indian) market," said Anup Bagchi, MD & CEO, ICICI Securities. "As of now there is a policy freeze. But with any small trigger, funds would start coming in again," Bagchi said.
Runaway inflation has compounded the negativity, forcing RBI to take monetary actions leading to higher interest rates in the economy, which in turn is affecting the profitability of Indian companies. For instance, the earnings growth of sensex 30 companies during the January-March quarter was just 2.4%, compared to an estimated 20.3%, a report by retail broking house Sharekhan pointed out. However, the numbers show some improvement if one excludes SBI and ONGC , both of which had huge exceptional items in their results last quarter. Compared to an estimated 16.4% earnings growth, the actual number was 11.4%, the report showed. This slide in bottom line has in turn forced most broking houses to cut price targets and profitability numbers of companies under coverage.
That's not all.
The slowdown in the advance tax filings of companies has also impacted growth, which points to the fact that companies expect their earnings to be lower. "There is a chain of government inaction, policy freeze, slide in corporate profitability and downgrades, which is at work now," said Sudip Bandyopadhyay, MD & CEO, Destimoney Securities.
The series of scandals involving top politicians, bureaucrats and company officials, some of them already in the jail, has hampered investor sentiment, brokers said. "FII fund managers agree there would always be scams, but they are surprised by the regularity," said head of institutional sales at a local brokerage.
Bandyopadhayay said some of the least-controversial policy decisions that the government can take include passing of the Warehousing Bill that would have a huge impact on the supply chain for food articles and amending the Forward Contracts Regulation Act (FCRA), which will make the Forward Markets Commission an independent body, allowing only domestic companies to procure from farmers directly. "Just getting a few things right can change the entire mood of the market," he said.
source-economic times
Steven
Management trainee-fundamental analyst
DENIP Consultants Pvt Ltd
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