The markets have been testing people’s patience for the past few months. The correction has now extended for 5 months and the question that’s on everyone’s mind is when will this end? In an interview to CNBC-TV18, market veteran Raamdeo Agrawal of Motilal Oswal said that the “market may be close to a bottom but just like the fall, that’s been gradual, the recovery would be too.” According to him, “The correction is the biggest medicine for the excesses and no one likes it.”
In his interview to the business news channel he mentioned that the “markets have corrected after 4 years of outperformance” and this has helped bring down “Nifty earnings to 20x from 23-24x earlier.” He expects “Nifty earnings to move to Rs 1150-1200 per share levels” if the credit flow improves and the GDP print comes in with a favourable reading indicating growth uptick.
Referring to excesses in the market, he pointed out that, “small and midcaps had rallied 70-80% and once they have corrected 20-30%, the excesses are visible making everyone uncomfortable. The irrationality of the markets is down for a large extent.” In fact the correction in the mid and smallcaps have raised worries about redemption pressure in the market and when Agrawal refers to excesses, it kind of tugs a chord in the heart of the average investor and their concern about where does the pain end. He also said that he expects the flows in AMCs will be a bit slower for now.
One of the other highlight of the recent rally was the euphoria in the primary market and promoter fund raising via QIPs. Speaking about the fund raising activity by corporate India, Agrawal told CNBC-TV18 that, there might come a time from 2-3 months when promoters may start buying stake in their own companies and those would be the companies to track.” He expects the IPO markets to come back once the correction is over.
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