Bear market good opportunity to buy Indian stocks?

Over the past six months, Sensex and Nifty 50 have recovered some of their falls and have rallied more than 2.5% and 2.3%, respectively. This is a much more promising performance than major indexes such as the Dow Jones which have fallen by almost 11% in six months. Not only that, even London Share The Footsie Exchange fell more than 3%, Shanghai’s SSE Composite Index fell more than 4%, Australia’s S&P/ASX 200 index recorded a drop of nearly 9% and South Korea’s Kospi index fell more than 13%. Japan’s Nikkei has risen slightly in six months. This is a performance between March 21 and September 21, 2022.

From the beginning of the year until now, Indians rupees depreciated more than 7% against the US dollar. A latest Crisil report reveals that among India’s competitors, the Vietnamese currency has depreciated relatively less than 1%, while the Chinese yuan has depreciated more (9). %) and Bangladesh’s currency fell double digits (10.6%). This is much lower than advanced economy currencies such as the Euro and the British pound, which have lost 11.7% and 17.6% respectively against the US dollar.

The rupee hit an all-time low of 80.12 on August 29, having managed to stay below 80 against the greenback so far.

According to a report by Emkay Wealth Management titled ‘The Guide’, the Indian economy is resilient and shows strength despite global weakness. The same can be seen in the stock and currency markets, where corrections in India’s benchmark indices and INR are quite low relative to other EM peers.

The Emkay report adds that, when taking a closer look at the selling by foreign investors, it can be seen that the majority of them are in the large-cap space and not in the mid-cap space. or small cap.

“Market capitalization incentives may be reviewed or revised accordingly. Any adjusted downside movement should be used as an investment opportunity for a long portfolio,” the report said. term”.

For now, recession fears have weighed on market sentiment, along with expectations of strong interest rate hikes from major central banks, multi-year high inflation, and the energy crisis in Europe and Europe. other expectations. The Fed is likely to raise interest rates by 75 basis points in a policy announcement expected later today.

Regarding the international market, the Emkay report explains that it “is seeing increased volatility as economies battle inflation and high costs of living. Eastern Europe.”

In the report, Emkay emphasized that while this may not be positive for export business, sectors or companies that may have business with the outside sector could be affected. due to this event. In the immediate future, this is a concern that requires effort.

Explaining how India outperforms its peers, the Emkay report said, India’s latest GDP data reflects an economy that is resilient and strong compared to any comparable economy. equivalent in the emerging markets space. While foreign investors sold in all emerging markets, the magnitude of currency devaluation was relatively less than in the case of the domestic economy.

Furthermore, the note adds, economic activity levels are better with one of the simplest signs that activity levels are increasing.

However, Emkay’s note also said that a significant challenge for the market in the immediate future is reduced liquidity and increased exchange rate. This policy is intended to prevent inflationary pressures, which can reduce the efficiency of the economy and hinder growth due to its negative impact on consumer demand. An increased ratio results in a higher cost of capital and can be a drag on companies with excessive capital expenditures.

Going forward, Emkay notes, the most recently recorded credit growth was 18%. This is quite healthy given that India is seeing momentum after half a decade of sluggish credit growth. The country will quickly enter the festive season and it will also help drive demand and consumption, and discretionary consumption is one area that could perform better. Consumption in the fashion and apparel sectors could also be positive with better earnings prospects.

Emkay expects the manufacturing sector to perform well due to spending companies and various government initiatives such as PLI, and also due to the opportunities presented by China and possible main beneficiaries. cars, cars. joint-stock companies, engineering and special chemical companies.

“Not only domestic growth but some export growth will also help the manufacturing sector,” the report said.

As noted by Emkay, this is a time to focus on earnings quality, businesses with strong balance sheets, leadership in their respective businesses, and sustained & visible business growth. clear. Such companies will have greater stability and quality even in the face of adverse conditions.

On Wednesday, due to weak global signals, Sensex settled at 59,456.78, 262.96 points or 0.44% lower. Nifty 50 dropped 97.90 points or 0.55% to 17,718.35.

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