Indian share markets are anticipated to see a ‘sharp correction’ quickly, as profit booking continues in the coming weeks, Credit Suisse mentioned. “We believe the equity market could see some further profit booking in coming weeks, but we expect this correction to be very sharp and to not last long,” Jitendra Gohil, Head of India Equity Research, and Premal Kamdar, Equity Research Analyst, Credit Suisse, mentioned in a note. Sensex has turned damaging year to date, falling 9% from mid-February highs.
The worldwide investment manager is, even so, not advising investors to turn away from domestic markets. Instead, Credit Suisse mentioned that it recommends investors to use this correction as a getting chance from a 6-to-9-month viewpoint. “While our global Investment Committee (IC) acknowledges near-term challenges in equities, it maintains a positive outlook on equities from a medium-term perspective, given the overall favourable growth prospects and ultra-loose monetary policies,” they added.
Banking on development to rebound sharply in the second half of the fiscal year, analysts at Credit Suisse choose cyclicals more than defensives and mid-caps more than substantial-caps. “We continue to prefer large banks, industrials and export-sensitive sectors like metals and chemicals. We also continue to prefer mid-caps given our expectation of a broad-based recovery in the second half of this fiscal year,” the note mentioned.
In the bond industry, Credit Suisse mentioned that the Reserve Bank of India’s quantitative easing is probably to maintain government bond yields variety-bound in spite of larger-than-anticipated provide and elevated inflation. This has led them to choose corporate bonds more than treasuries, with a preference for 1 to 3-year duration bonds.
India is grappling with the second wave of the coronavirus pandemic and the continuous spike in day-to-day case count has led some states to announce restrictions on financial activity. While the restrictions could effect development, Credit Suisse believes India Inc is much better positioned to tackle the challenges this time.
Currently, the consensus development projections for India forecast for India stands amongst 10.5% to 12.5% for the fiscal year. However, the spike in circumstances, going from 10,00 in February to 3 lakh in April has led to lockdowns that may perhaps effect projections. However, there is nonetheless hope for India. “Even if we assume a cut of about 100–150 bp to India’s GDP, India can still deliver low double-digit real-GDP growth in FY 2022, the fastest growth in the world,” the note added.