Global equity markets are seeing a rebound after a two-day sell-off that also led to a wipe out of ₹15 lakh crore worth of investor wealth on Monday.
However, the US futures are witnessing a rebound after a three-day drop, while the Nikkei has recovered most of Monday’s 12% fall.
But how are global market experts viewing this global market fall and its impact on the Indian markets? Here are some views:
Venugopal Garre, Bernstein
With the latest spate of not-so-good data emanating out of the US and the tech / AI frenzy cooling, talks of an imminent recession have gained traction.
But what about India? The most expensive emerging market? Garre wrote in his note, adding that the challenge that India sees is more internal than external.
Garre further wrote that 45% of the NSE 200 stocks have seen a downgrade of over 1% and but valuations remain heavy despite the two-day correction. “We see the recent market fall as a necessary evil to weaken this “enemy within.”
Bernstein said that they remain neutral on the Indian markets with an “underweight” stance on small and midcap stocks. The brokerage has a year-end target of 23,500 for the Nifty.
Mahesh Nandurkar, Jefferies
Jefferies’ Nandurkar wrote that the higher risk of a downturn in the US is now factoring in a 132 basis points rate cut from the US Federal Reserve by the end of 2024.
“The consequent USD weakening should augur well for Indian stocks on a relative basis,” Nandurkar wrote, adding that on an absolute basis, the risk is towards the downside due to one of the longest bull runs, unsustainably high domestic retail flows and potentials capital gains tax hikes in the future.
Jefferies remains defensive and their preferred largecap picks include private lenders, staples, L&T and two-wheeler stocks.
Laurence Balanco, CLSA
India’s Nifty has outperformed by falling less. Nevertheless, in absolute terms the Nifty is now testing support provided by the 50-DMA at the 23,905 area. Failure to hold this level would leave the Nifty vulnerable to drop back to the upper boundary of the March-May trading range at the 22,775 – 22,800 area.
Alexander Redman, CLSA
We characterise yesterday’s price action as the panicked unwinding of seasoned trades (short yen / long tech) in conjunction with a reappraisal of the US growth outlook rather than indicative of a systemic crisis in the offing. US jobs data lends credence to the Fed holding rates in July being a policy error.
Viktor Shvets, Macquarie
Shvets wrote in his note that post the sell-off and a spike in the VIX, what are the dangers that investors face? Will they join the (selling) stampede or has the fall created a buying opportunity.
He attributed the sell-off to a confluence of events like the Fed being behind the curve, concerns over the “tech bubble” bursting, potentially disruptive unwinding of the Yen Carry Trade and geopolitical issues.
“Although stampedes are inherently unpredictable, we view it is closer to irrational, thus creating buying rather than selling opportunities,” he wrote.
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