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“My view is that we should basically prepare for zero returns in the next 12 months as well,” Mahesh NandurkariJefferies India MD and Head of Research said. This, despite nifty It fell below the 16,000 mark on Monday.
Equity strategists don’t see a sell-off as unexpected. “I think this full year is going to be a weak year from the returns perspective and while Nifty has dropped below 16,000, I really don’t think we will still give positive returns from here on in the rest of the year,” he said. told ET Now.
Explaining the dichotomy between the economic cycle and the valuation cycle, he said that while corporate earnings will be quite strong in the next 1-2 years, the multiples need to go down as the valuation cycle peaks.
“Multipliers can go down in two ways. One is that we find near-term market corrections of 10-15%, which will bring the valuation multiples down to where the rest of the world has seen improvement. Another way we see that the market is moving sideways and earnings are increasing and in the next 12 months, we see a sideways market hovering at the 16,000 mark. This would automatically mean that the PE multiples have come down by about 15 per cent as earnings growth is likely to remain the same.
Compared to other markets, India has been a relatively big outperformer. While the Nifty is down 9 per cent year-on-year, most other global indices, including the S&P and Nasdaq 20-25 per cent down.
“India is hardly a candidate for bottom fishing because we haven’t improved that much,” he said, adding that there doesn’t appear to be any big money-making idea from the broader market.
So, what should investors do for the next few months?
“In stock selection, some of the focus should be on defensive, utilities and consumer staples. We also like IT services as that sector has also improved a lot and we believe that the demand scenario from the US is not as bad as is being feared.
He also likes four wheeler stocks which have been going through a rough patch in the last few years. “But we believe that as the supply constraint gradually eases and the replacement cycle begins, four-wheeler stocks should certainly see some positive drift from this trend.”
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)
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