There's too much negativity around the stock market, and the common refrain is, "There is too much negativity." It is not without reason. A mix of macroeconomic and geopolitical concerns - inflation, crude oil prices, hawkish central banks and war - is affecting stocks around the world, including India.
As of May 18, the benchmark S&P BSE Sensex is down nearly 13 per cent compared to the high of 62,245. It touched 43 in October of last year. It is down nearly 4,000 points or nearly 7 percent, over the current year, as of May 18th. The Nifty, which is more closely tracked by traders and derivatives players, was well above the 17,000 mark at the beginning of the year. It fell to a low of 15,671 in March and was at 16,240 as of May 18 - a decline of nearly 6.5 per cent in the current calendar year. In a report released on May 16, Bank of America lowered its base case Nifty target to 16,000 from the earlier 17,000. The report said that the market returns from current levels are flattish than earlier expected tightening.
Has the recent correction made India an attractive investment destination? According to Piyush Garg, Chief Investment Officer ofICICI Securities, the market was returned to its fair value of around 19.5 times trailing 12 months earnings per share, compared to the 10 year bond yield of around 7.3 per cent after the near 10 per cent correction from the 18,000 levels last year.
India has commanded a premium over other EMs, owing to its demographics, stable government and domestic flows that have grown to counter any selling by FIIs, according to Garg, while some emerging markets EMs India may still be overpriced, but that has not been the case for the past eight years.
The global geopolitical situation has unnerved many, including foreign investors, who have been net sellers of Indian stocks for the past eight months, with net sales of nearly $26 billion.
Sanjiv Bhasin, Director of IIFL Securities, believes that Indian markets are in the last leg of the sell-off and might see a rebound soon, since it is in oversold territory. The long-term allure of the story of India remains intact. In the past two years, global manufacturing has moved away from China, while the global risk sentiment has weighed on India for the past couple of weeks on the back of interest rate hikes by central banks across the world, says Bhasin.
Bhasin says that the journey from a $3 trillion economy to a $6 trillion economy by 2030 will bring multiple highs for Indian markets.
Garg of ICICI Securities believes that if someone is on the sidelines, they may look at entering the markets at the current levels. The time for investors seems to be ripe.