How far is the 100,000 meter mark for Dalal Street? Will retail investors maintain confidence? Is a market correction imminent?

Ahead of the dawn of Samvat 2081, Mint reached out to 16 analysts to gauge market sentiment, in the inaugural edition of a quarterly survey. The big question on everyone’s mind: Will the Sensex hit the six-digit border soon, or will the turmoil hold it back?

In a split verdict, almost half (47%) of respondents expressed some optimism that the index will reach this milestone by March 2025. Others expressed doubt (53%) , mainly citing global challenges. That said, most were confident about the prospects for retail investors, saying China’s recent stimulus measures would not cost India in terms of much-needed foreign portfolio inflows (FPIs). Mint The survey covered research directors, founders, CEOs and senior fund managers of mutual funds, financial services companies and investment banks.

Market dilemma

Indian stocks have hit impressive highs recently, but signs of a correction are growing stronger. REITs began withdrawing capital amid uncertainties surrounding the U.S. election and conflict in West Asia.

Two of the 16 analysts – Bino Pathiparampil, head of research at Elara Capital and Pankaj Pandey, head of research at ICICI Securities – were “very optimistic” about the Sensex’s potential to hit 100,000 by March. Five were moderately or somewhat optimistic.

Atul Parakh, CEO of online investment and trading firm Bigul, who was somewhat optimistic, said it was possible to reach the 100,000 mark but urged caution. “While strong corporate profits and strong foreign investment could propel the index to this milestone, it could take longer, potentially until the end of 2025 or beyond, due to market corrections and uncertainties economic. Historical growth rates demonstrate support for the notion of incremental growth rather than a rapid push toward the goal. »

Eight analysts were pessimistic. Gaurav Garg, research analyst at Lemon Markets Desk, said the 25% rally needed to reach 100,000 was highly unlikely. He said valuations remained tight even after October’s pullback and recent corporate earnings forecasts were lukewarm at best, not to mention external uncertainties.

Focus on volatility

A significant majority (63%) rate current volatility as moderate, while 19% rate it as low (the remainder rate it as high). Some also shared their perspectives: Pandey, besides Dhiraj Relli, MD and CEO of HDFC Securities; Sanjeev Hota, head of research at Sharekhan by BNP Paribas, expects volatility to remain “moderately elevated” for now.

Where is the market heading for the rest of 2024? Around 43% of experts predict a correction, followed by a recovery by the end of the year; as many expect a rally marked by volatility. One said the market would end the year lower than today, while another said a rally was expected afterward.

Profit growth under scrutiny

All but one of the analysts in the survey said profit growth would likely be modest, between 5 and 10 percent, in the quarter ended in September. (A larger increase of 10 to 20% was expected.)

Shrikant Chouhan, head of equity research at Kotak Securities, expects a 5.3% year-on-year rise in net profit of Sensex companies, with modest growth in various sectors. “We expect a low to mid-single digit increase in net income of banks (due to slower loan growth), capital goods (due to weak domestic execution), consumer staples (mixed trends in terms of growth/margins) and transport sectors. …Oil, gas and fuels will weigh on overall net profit growth,” he said.

Hota predicted only 2% earnings growth for Nifty, slowed mainly by oil marketing companies (OMCs), cement and metals. Excluding OMC and metals, he said Nifty 50 companies could post 7 per cent growth, but called for caution, given the importance of external factors.

External influences and the US Fed

A lot could depend on the US Federal Reserve’s course of action: 73% of respondents predicted the Fed would cut interest rates in December, a move that could have positive ripple effects in India. “The Indian market is expected to resume its rally after a correction period,” said Sorbh Gupta, senior fund manager (equities), Bajaj Finserv AMC.

Chouhan said that following the Fed’s recent 50 basis point rate cut, a similar reduction by the end of the year could attract foreign capital flows to India, particularly if investors seek higher returns in a growing economy.

Hota highlighted the MSCI India’s historic performance following Fed rate cuts, noting that such conditions have generally favored the Indian market, particularly in non-recessive environments. “A total of 250 basis points of rate cuts in this easing cycle by 2026 means there will be trillions of dollars in fixed income looking to move into higher yielding assets, including emerging market stocks, which bodes well for Indian stocks,” he added.

China’s Stimulus Measures and Foreign Investment

THE Mint The survey also examined the impact of China’s recent stimulus measures on FPIs in India. Half of those surveyed had a “neutral” view, with Pathiparampil saying it would depend on various factors, including the effectiveness of China’s stimulus measures and India’s economic performance. But around 44% disagree that this would lead to lasting abandonment of India.

Gupta said that while there could be some movement in the short term, a significant or sustained exit of FPIs from India was unlikely. Deepak Shenoy, founder and CEO of Capitalmind, said Chinese stimulus measures would have minimal impact on FPI flows to India.

Sentiment of retail investors

Despite market challenges, retail investors maintain a bullish outlook, with 69% of market experts surveyed believing this trend would persist. Radhika Rao, executive director and principal economist at DBS Bank, said: “While there may be short-term adjustments as retail investors experience volatility in their returns, more persistent SIP flows are likely to persist due to the dollar cost averaging approach. » Hota said stable domestic macroeconomic conditions, characterized by lower inflation and strong consumption, support ongoing equity investments. He anticipates a shift in leadership from small and mid-cap stocks to more attractive large-cap stocks.

However, 25% of experts express uncertainty about the future. Shenoy said: “The market has not corrected even 10% in 2024, and not even 20% in the last two years. When it reduces by that much, we will see how well retail flows hold up. But we were surprised in 2022, when retail flows increased due to volatility, so we cannot predict that they will slow down or increase. »

Gupta warned that the continued market decline could cause new investors to suffer losses in their mutual fund portfolios, potentially prompting them to discontinue their investments or redeem their funds.

The survey also showed that experts consider the banking and financial sectors to remain undervalued, with Gupta specifically pointing out that private banks are undervalued. “Profits have improved in recent quarters, but the sector has seen a downgrade. The risk-reward profile now looks favourable,” he observed.