India’s stock markets began Samvat 2073, the Hindu calendar year, on a tepid note, with both the benchmark BSE Sensex and NSE Nifty declining marginally on Sunday as near-term uncertainties like the outcome of the US Presidential elections and moves by the Federal Reserve weighed. However, analysts remain bullish over the long-term and expect a strong earnings recovery over the next few quarters and continued growth in India’s economy to rally markets.
The Sensex opened 65 points higher at 28,066.32 over Friday’s close of 27,941.51. It touched a high of 28,095.71, and a low of 27,890.14, before closing at 27,930.21, down 11 points or 0.04%. Similarly, the wider NSE Nifty50 index closed 12 points or 0.1% lower at 8,625.70.
Over the last Samvat (Since Nov 11, 2015), the Sensex ended up 8%, while the wider Nifty50 closed 10.4% higher.
Stronger economic growth prospects, stable interest rates, low inflation, and contained fiscal deficit will set the stage for earnings to grow in double digit over the next few quarters, say analysts.
“Some companies like Maruti Suzuki have started seeing volume growth , others are just waiting to take off, using the strong tail wind created by seventh pay commission and very good monsoon. We expect coming year to be very promising, in corporate earnings and that will be reflected on the markets,” said Motilal Oswal, chairman and MD of Motilal Oswal Financial Services.
Valuations at overall level are just above the average of last 10 years, analysts add.
“We are generally optimistic on India growth story and remain bullish long-term on the back of the country’s strengthening economic fundamentals. We believe that the domestic consumption story is gaining strength, which is clearly reflected in the strong quarterly earnings reported by companies in the automobile sector,” said Vaibhav Agrawal, vice-president and head of research at Angel Broking.
Over the last Samvat, foreign institutional investors pumped in close to Rs 38,000 crore in India’s equity markets. Domestic institutional flows, backed by retail money in mutual funds, remained strong as well, with investments of about Rs 36,300 crore over November-September.
“Foreign investors are allocating more to India through emerging market funds. However, some money is sitting on the sidelines and we could see some slowdown in fund flows in the next two quarters, depending on the outcome of the US elections and a possible interest rate hike by the Federal Reserve,” said Kaustubh Belapurkar, director of fund research at Morningstar India.