 "Market may correct 6-8% from current level; BoAML")
Indian equity market may correct 6-8% from the current level as the Reserve Bank of India’s (RBI's) credit policy belies the high market expectations, suggests the global investment bank - Bank of America Merrill Lynch (BoAML).
The Bombay Stock Exchange (BSE) 30-share S&P BSE Sensex tanked 500 points at 19,857 points today at 1420 hours, declining nearly 3.8% or 790 points from 20,647 post RBI policy.
The global investment bank sees Sensex range-bound in the 18,500-20,500 range as weak economic and earnings growth caps the upside while hopes of rate cuts and policy measures protect the downside.
The markets had rallied sharply since Raghuram Rajan took over as RBI Governor, rising 9% since September 4th and now trade near the top end of the range, BoAML said in a report.
Given the delay in macro recovery and demand destruction, we do not expect a material pick up in corporate earnings. While be believe margins would likely stabilize but it is the poor sales growth which would result in a tepid recovery in profit growth, analysts at BoAML said in a report.
The analyst said, in emerging market (EM) context India has been a market performer since the tapering fear began in May. However, due to poor performance of the currency $ performance of Indian markets has lagged most other EM peers.
The Bombay Stock Exchange (BSE) 30-share S&P BSE Sensex tanked 500 points at 19,857 points today at 1420 hours, declining nearly 3.8% or 790 points from 20,647 post RBI policy.
The global investment bank sees Sensex range-bound in the 18,500-20,500 range as weak economic and earnings growth caps the upside while hopes of rate cuts and policy measures protect the downside.
The markets had rallied sharply since Raghuram Rajan took over as RBI Governor, rising 9% since September 4th and now trade near the top end of the range, BoAML said in a report.
Given the delay in macro recovery and demand destruction, we do not expect a material pick up in corporate earnings. While be believe margins would likely stabilize but it is the poor sales growth which would result in a tepid recovery in profit growth, analysts at BoAML said in a report.
The analyst said, in emerging market (EM) context India has been a market performer since the tapering fear began in May. However, due to poor performance of the currency $ performance of Indian markets has lagged most other EM peers.
Any globally adverse event or another round of depreciation in the Rupee can quickly change the mood of foreign investors. A recent history reveals that even a small outflow by the FIIs can bring down the markets significantly, said report.
Meanwhile, BoAML continues to favour global plays such as software and pharma over domestic plays given that rate cut expectations in the market will be further toned down. Telecom remains another over weight and play a better monsoon demand through autos, added report.