Bluechips shed pricey tag amid correction

Table of Content


The recent market correction has cooled valuations of headline indices somewhat.

The benchmark Nifty is down 14 per cent from its September highs and now trades at a one-year forward price to earnings multiples of 18.6x, 9 per cent below its long-term average. In the past, Nifty’s forward P/E has dropped to 10.5x and 15x during the global financial crisis of 2008 and the pandemic-induced crash in early 2020.

India’s market cap-to-GDP ratio has fallen to 120 per cent from 146 per cent in September last year.

Midcaps and smallcaps, however, continue to trade at a 22 per cent and 25 per cent premium, respectively, to their long-term historical averages, highlighting the risk of further corrections if earnings fail to catch up.

“Given the current market environment, large caps offer better downside protection and more reasonable valuations, making them the preferred bet,” said a note by Motilal Oswal Financial Services.

The brokerage believes that sectors such as BFSI, consumption, and healthcare offer attractive opportunities, while cyclicals such as automobiles, metals, and cement may remain under pressure from input costs and weaker demand. “The correction, while painful, is creating selective accumulation opportunities. Investors should focus on stocks with strong earnings visibility and stable cash flows,” it said.

Activity in cash markets has moderated in recent months, with the retail cash average daily volumes declining to about ₹300 billion from the peak of ₹500 billion. Cash delivery volumes has come off its peak as well.

Headline valuations, however, could be misleading, said a note by Kotak Institutional Equities. The brokerage, which does not find value in most parts of the market, feels consumption stocks are trading at full-to-frothy valuations, given short-term growth issues and medium-term disruption risks, while investment and outsourcing stocks are trading at fair-to-full valuations.

The key downside risks for the market are a sharper-than-expected global slowdown, sustained FPI selloff, a weak monsoon and a dip in retail flows into equities, especially into small and mid-cap funds.

Any underperformance or profit shortfall could lead to volatility for overvalued companies, said Kenneth Andrade, Director, Old Bridge Capital Management, adding that global investors could divert some capital away from India to destinations such as China and Europe, which were relatively undervalued.





Source link

AIMPWA

mmkrishnandasu@gmail.com http://msmenews.sbs

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent News

Trending News

Editor's Picks

When consumption push and fiscal consolidation go hand in hand

The budget this year came in the background of an economic slowdown led by weak urban consumption and lower government capex. Hence, finance minister (FM) Nirmala Sitharaman was expected to stimulate growth while continuing on the path of fiscal consolidation. The budget has delivered on this by incentivizing urban consumption through tax cuts while continuing...

Kerry Washington invests in wedding marketplace Cheersy

Kerry Washington is expanding her angel investment portfolio, serving as lead investor in the pre-seed round of the wedding marketplace Cheersy.  Cheersy, which was founded in 2024 by Amy Shack Egan, helps couples find day-of service wedding coordinators and has raised a total of $550,000, from other investors including Christina Tosi, the founder of Milk...

ALL INDIA MSMES PROMOTION AND WELFARE ASSOCIATION

Quick Links

Popular Categories

Must Read

AIMPWA © 2025- All Right Reserved. Designed and Developed by  growGX.com