Shrikant Chouhan, Head of Equity Research at Kotak Securities, highlights that market movements are significantly impacted by global macroeconomic conditions and ongoing geopolitical tensions. He notes that Indian markets have begun to factor in domestic economic indicators and liquidity situations. Chouhan suggests that if the markets do not break through crucial resistance levels of 26,277 for Nifty and 85,978 for Sensex, time-based corrections may occur in the near future. He recommends a strategy for investors to buy on dips at key support levels, and to consider reducing cash positions at resistance levels to facilitate portfolio consolidation.
Future Market Trends: Correction or Bullish Continuation?
Chouhan believes that the Indian markets are heavily influenced by global macroeconomic trends and geopolitical events. With the current scenario, he sees the Indian markets starting to account for domestic economic conditions and liquidity factors. However, a lack of support from global macro indicators and easing of geopolitical tensions could hinder growth.
Should Investors Retain Cash or Invest in Equities?
The enduring growth story of India’s economy is intact, yet the current high valuations pose limits on potential market upsides. Chouhan anticipates possible time-based corrections if resistance levels of 26,277 for Nifty and 85,978 for Sensex remain unbreached. His strategy entails purchasing during dips at significant support levels, while also advising investors to reduce cash positions as these resistance levels approach, thereby strengthening their portfolio.
Q2FY25 Earnings Expectations: Are Surprises in Store?
Looking forward to the September quarter, Chouhan foresees a growth in net profits for the BSE 30 index by 5.3% year-on-year and 2.7% quarter-on-quarter, while the Nifty 50 index is expected to grow by 3.7% YoY and 2.5% QoQ. For FY25, the earnings per share (EPS) for the BSE 30 index is projected at ₹3,448, and for FY26, ₹4,039. Similarly, for Nifty 50, the anticipated EPS for FY25 stands at ₹1,063, and for FY26 at ₹1,234. Notably, the consumer staples sector is expected to experience value growth driven mainly by pricing strategies.
Analysis of the October RBI MPC Decision
Regarding the recent monetary policy committee (MPC) decision by the Reserve Bank of India (RBI), Chouhan observes a decline in demand conditions, which might put downward pressure on the RBI’s growth forecasts for FY25/26. With inflation aligning closely to the 4% target by FY26, this creates an opportunity for potential policy easing. However, an unexpected spike in near-term food inflation could delay the anticipated start of the rate cut cycle toward the first half of calendar year 2025. Currently, Chouhan’s base case envisions a mild rate cut cycle of 75-100 basis points beginning in December.
Anticipated Challenges for Indian Markets
In the upcoming quarter, Indian markets could face a variety of challenges stemming from global macroeconomic factors. Key issues include fluctuations in the 10-year US Treasury bond yield, the dynamics of the US rate-cutting cycle, the magnitude of stimulus measures from China, and volatility in crude oil prices driven by escalating geopolitical tensions.
Year-End Target Predictions for Nifty
Chouhan projects that the Nifty should remain within a trading range of 23,000 to 27,000 as the year concludes, reflecting the market’s necessity to navigate through apparent resistance and support levels.
Advice for New Investors
For those new to investing, a long-term perspective is crucial. It is advisable to invest with an outlook exceeding two years and to adopt a gradual investment strategy focused on buying during market dips. For those considering systematic investment plans (SIPs), this approach could provide a much more stable investment experience.
Disclaimer: The views and recommendations expressed here are those of individual analysts or brokerage firms, and do not represent Mint. Investors are urged to consult certified experts before making any investment decisions.
