This report is from this week's CNBC's Inside India newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe The stock market in India hasn't had the best start to this year. Fears of lofty valuation multiples alongside trimmed earnings expectations have led to a steady decline for the Nifty 50 index.
It has now re-entered correction territory – a 10% fall – since its most recent high in late September. In fact, year to date, the benchmark is now in the red. That's hardly out of the ordinary for investors, however. By my count, the Nifty 50 turned negative on the fifth trading day of the year in seven of the past 10 years. It's a far cry from the bullish sentiment of yesteryear that the Indian stock market would race ahead of the pack. As earnings disappoint – consensus has cut growth estimates for the NIFTY 50 from 15% to 5% – investors will likely re-evaluate their positions, limiting market returns,' said the bank's Asia Pacific strategists led by Herald van der Linde in a note to clients Thursday. The investment bank downgraded Indian equities to neutral. Morgan Stanley pointed out that stocks last year, for the first time in eight years, performed worse than bonds and gold (which, to be fair, outperformed most global markets). Yet many, including the Wall Street bank, believe that Indian equities, after their long slide, are now ripe for picking. 'India has bottomed out,' wrote Venugopal Garre, strategist at Bernstein, in a note to clients last week. Garre is expecting economic growth to pick up over the next three to six months and is urging investors to get ahead of the turnaround. 'Investing ahead of the recovery is suggested,' he added. Bernstein expects the Nifty 50 to end the year at 26,500, up 13% from current levels. Morgan Stanley says the central government is likely to reduce the deficit in February when it unveils its budget, which could lower bond yields and benefit listed companies from lower borrowing costs. This view is echoed by equity strategists at Citi. They expect the Indian economy to expand by 6.5% this year, driven by a boost from the government's infrastructure spending, which, according to the government, is expected to increase market intelligence efforts and identify export opportunities. India's geopolitical positioning 'favorable in this Trump 2.0 era,' according to GIB Asset Management's portfolio manager Kunal Desai. 'A number of Indian companies are taking advantage as customers look to take a dual source approach to their supply chain,' Desai said. Investor interest in India waned at the end of 2024 because of a pullback in Indian equities during that period. One portfolio manager, however, remains bullish on the country. The dip in the market is a buying opportunity, he says, and the benchmark 10-year Indian government bond yield has been flat so far this year and has traded around 6.76%. On CNBC TV this week, BNP Paribas' head of Indian equities, Abhiram Eleswarapu, thinks Indian markets are going through'a soft phase' at the moment because valuations are at an elevated level. However, this'shallow correction' might be ending, and markets India's cement industry to expand in the second half of the year, which suggests that infrastructure spending is coming back. Government expenditure, residential real estate and rural spending will form the bulk of such investment, resulting in A busy week with major economies releasing inflation data, while India's Standard Glass Lining Technology, Capital Infra Trust and Quadrant Future Tek list publicly. January 12: China consumer price index and balance of trade for December January 14: Capital Infra Trust IPO, Quadrant Future Tek IPO, U.S. producer price index for Decembe
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