“My view is that we should basically be preparing for zero returns even over the next 12 months,” Mahesh Nandurkar, MD & Head of Research, Jefferies India, said. This, despite the Nifty plunging below the 16,000 mark on Monday.
The equity strategist doesn’t find the selloff unexpected. “I think this whole year is going to be a weak year from the returns perspective and while the Nifty has corrected to less than 16,000, I really do not think that we will still be making positive returns from here on in the rest of the year,” he told ET Now.
Explaining the dichotomy between the economic cycle and valuation cycle, he said while the corporate earnings would be pretty robust over the next 1-2 years, multiples need to go down as the valuation cycle has peaked.
“The multiples can go down in two ways. One is that we get near-term market corrections of 10-15% which will bring the valuation multiples down to where the rest of the world has seen corrections. The second way is that we just see the market moving sideways and the earnings growth catching up and over the next 12 months or so, we see a sideways market hovering at about say 16,000 mark. That would automatically mean that the PE multiples have come down by about 15 per cent because that is what the extent of earnings growth is going to be.”
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As compared to other markets, India has been a relatively big outperformer. While the Nifty is down 9 per cent year-to-date, most of the other global indices including S&P and Nasdaq are down 20-25 per cent.
“India is hardly a candidate for bottom fishing because we have not corrected as much,” he said, adding that does not see any big money-making ideas from the broader market.
So what should investors do for the next few months?
“In stock selection, some focus has to be on defensives, utilities and consumer staples. We also like IT services because that sector has also corrected quite a lot and we believe that the demand scenario from the US is not looking as bad as it has been feared,” Nandurkar said.
He also likes four-wheeler stocks which have been through a bad patch over the last few years. “But we believe that as the supply constraint slowly eases up and the replacement cycle begins to play out, four-wheeler stocks should definitely get some positive drift out of this trend.”
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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