NSE Nifty 50 is trading at a stretched PE ratio of 40.93. Meanwhile, on a one-year forward basis valuations look wealthy at 22.3x FY22E. Despite this, stock markets continue to stay unscathed and hover closer to the all-time highs. Is it now time to pull revenue out of equities and wait for a correction? “Since near term valuations are still very much on the higher side it is not wise to expect healthy returns in less than one year,” Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities, told TheSpuzz Online.
Sceptical but not bearish
Nifty 50 has doubled from March 2020 lows, operating ahead of the economy which is just out of the woods of a technical recession. However, analysts are not bearish as of now, but are only cautioning investors and urging to deploy money gingerly. Analysts think that domestic markets are hunting forward and expecting a robust recovery for the Indian economy, propelling earnings development. Rusmik Oza stated that a enormous stimulus is most likely to continue in 2021 along with a robust V-shaped financial recovery, which should really provide help to the market place at reduced levels.
“Markets are anticipating that from the financial year 2022 second half onwards we would see recovery in earnings that would help support the valuations,” stated Ajit Mishra, VP-Research, Religare Broking. Investors would now face a difficult time selecting stocks, he added. “The market might inch higher but from here on it won’t be an easy ride for investors,” Ajit Mishra stated. Analysts do think Dalal Street could be in for a consolidation phase more than the next handful of months and only break out on the greater side as investors look forward to the fiscal year 2023 earnings.
How to trade from right here
Long-term investors should really now stay invested but stay clear of lump-sum purchases, according to Likhita Chepa, Senior Research Analyst at CapitalVia Global Research. “New investors are advised to take positions at dips or corrections rather than buying at higher levels,” she added. Sensex and Nifty have noticed corrections on their way to the major, and Rusmik Oza believes purchasing the dip is the appropriate way forward. “India has become a good buy on dips market because of its own strength and low base of last year. Hence, it is ideal to use any future corrections to accumulate stocks with a 2 to 3-year view,” he stated.
Ajit Mishra advises investors to go for theme-particular trades. “IT is stable and FMCG, so defensive sectors, after correction have some opportunities. Metal stocks have done good and investors should book profits and wait for some dip while being selective,” he stated.
(The stock suggestions in this story are by the respective investigation and brokerage firms. TheSpuzz Online does not bear any duty for their investment guidance. Please seek advice from your investment advisor prior to investing.)