Emkay Global has advised investors to be cautious, stating that the recent market correction isn’t deep enough at 19.5x PER. The brokerage remains neutral on equities, suggesting that investors should hold their positions but not buy more unless the Nifty drops another 10% to below 20,000, which would make it more attractive at <18x PER.
Emkay predicts that Narendra Modi will return as Prime Minister, but under different circumstances. The overall economic direction is expected to stay the same, but reforms in land, labor, and privatization are unlikely to happen soon. With a higher risk perception, Emkay advises switching from PSUs and capital goods to FMCG stocks and re-entering the market if the Nifty falls below 20,000.
The brokerage expects a short-term market decline due to increased risk. It recommends avoiding PSUs and capital goods for now, while seeing potential in FMCG, value retailers, and healthcare.
On June 4, Indian markets saw their worst session in over four years, driven by election results showing a tighter contest for the Modi-led NDA government. The S&P BSE Sensex and NSE Nifty 50 both experienced significant losses.
Emkay notes that despite a narrower majority, Modi’s return as PM will mean reliance on regional allies, possibly shifting focus towards stimulating consumption. The broader economic trajectory, including manufacturing and job creation, is expected to continue with minimal changes.
Reforms and privatization efforts are now at risk, potentially affecting government capital expenditure in the short term. Political reforms like harmonizing elections are also unlikely. Emkay suggests staying vigilant and reassessing market positions if the Nifty drops to more attractive valuation levels.
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