Just as the ‘Buy India, Sell China’ calls appeared to be losing momentum, global brokerage Citi on Friday backed Dalal Street by upgrading India to overweight on strong earnings momentum and projected growth.
In the last month, Hong Kong’s Hang Seng has rallied nearly 11% against a downside of about 3% in Nifty. FIIs too have withdrawn over $2 billion from Indian stocks so far in the month of May, reminding investors of the adage of ‘Sell in May and go away’.Ahmedabad Stock
The recent rebound in Chinese stocks has come despite worsening fundamentals, while India is delivering solid profits, Citigroup strategists wrote in a report while downgrading China and upgrading India in emerging market allocation.
“China’s recent rally has occurred despite weakening fundamentals; we downgrade to neutral,” Citi strategists said, adding that in the context of rising global valuations, the additional gains in emerging markets should come from earnings growth, which is present in countries such as India.Surat Stock
Earlier in October, global brokerage firm Morgan Stanley had described India as its most preferred emerging market (EM) and increased its overweight stance on Indian equities saying the relative growth is improving and the macro-stability setup looks sufficient to withstand the higher real rate environment.
Among domestic brokerages, Prabhudas Lilladher has set a target of 25,810 for Nifty by the end of December 2024.
“The beginning of June is expected to be a crucial turning point as uncertainty around the political front and monsoons will be over, which can significantly increase FII inflows. We advise buying during market dips in the run-up to June 4, 2024,” Amnish Aggarwal, Head of Institutional Research, Prabhudas Lilladher said.Jaipur Investment
The current weakness in the market is largely led by FII selling.
“So long as this ‘Sell India, Buy China’ trade sustains, FII selling will weigh on the markets. The situation can change dramatically when clarity emerges on the election outcome. If the election results turn out to be favourable from the market perspective, aggressive buying by DIIs, retail, and HNIs can push the market sharply up,” said Dr V K Vijayakumar of Geojit Financial Services.
Valuation is another concern as the present market seems to be fairly priced based on FY25 earnings estimates, with most sectors trading at rich valuations or fair valuation.
“There are looming risks to earnings growth over the upcoming quarters, primarily due to persistently weak consumption trends and the possibility of reduced government spending during election periodsVaranasi Stock. Given the elevated expectations and rich valuations, there is no room for error. Consequently, any potential downward revisions in earnings forecasts could pose a risk of corrections in the market over the next 2-3 quarters,” said Vinit Sambre, Head-Equities, DSP Mutual Fund.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)Agra Wealth Management
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