Ajay Bagga, a market expert, believes that the Indian markets could be ready for a rebound, despite recent volatility. He notes that the current environment is marked by skepticism rather than excitement, even as foreign investors pull out funds and company promoters sell shares. Here are some key takeaways from his talk with ET Now:
Market Movements and Recovery Potential
Bagga points out that the market experienced a downturn this past week, with losses totaling around $7 billion from foreign institutional investors (FIIs). Factors like a slowing economy, a cautious Reserve Bank of India (RBI), and rising food prices have kept rate cuts off the table. Disappointing corporate earnings are also triggering sell-offs in certain sectors, like gas and fintech companies. However, the market is holding steady without much enthusiasm, which Bagga sees as a positive sign for future recovery, especially as the festive season approaches.
FII Trends and Global Impact
Bagga acknowledges that Indian markets have lagged behind their global counterparts for three weeks. A major reason for this is the outflow of foreign funds, compounded by ongoing developments in China. Recently, China announced a stimulus package, which boosted its stock market significantly. While Bagga expects some more FII outflows, he is optimistic that the Indian market can absorb these, especially with domestic investors stepping in. He anticipates a shift in foreign investment trends after the U.S. presidential election, which may positively influence Indian markets.
Earnings Season Insights
Earnings reports for the second quarter have been lackluster overall, with consumer sectors disappointing due to a delayed revival in rural demand. Bagga emphasizes that without monetary or fiscal support, private consumption will struggle, impacting GDP growth. However, he sees potential in the capital goods and power sectors, as government spending increases. Private sector banks are also showing signs of improvement and may see a turnaround in the coming quarters. As for the IT sector, while it has performed well, Bagga suggests a cautious approach for now, advising investors to wait for clearer opportunities.
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