The Indian stock markets have been witnessing turmoil ever since the beginning of this year on the back of weak corporate earnings, selling in global markets, soft rupee, disappointing macro-economic data and further downfall in crude oil price. Since the beginning of 2016, the BSE Sensex fell 6.37 per cent, or 1,662.50 points to 24,455.04 till January 15. The 50-share index, Nifty plunged 6.39 per cent, or 508.55 points, to 7,437.80 during the same period.
The benchmark closed at a 20-month low of 24,188.37 points on Monday as foreign portfolio investors (FPIs) continued to take risk off the table.
Among the sectoral indices, the BSE Capital Goods index fell the most — 12 per cent so far in January. It was followed by BSE Bankex (down 10 per cent), BSE Realty (down 9 per cent) and BSE Metal (down 8 per cent). Rest all other indices are also in red.
“We do not rule out a further correction in the Indian market given the confluence of several negative global and local events. However, the correction will offer investors an opportunity to increase exposure to good long-term stocks where valuations are reaching interesting levels. India’s macroeconomic position is quite decent and growth challenges are being addressed. We stick to our view of second-half recovery and 10-15 per cent returns for the year,” Kotak Institutional Equities wrote on Monday.
The brokerage also listed a few things that could help in improving Indian stock markets sentiments
1. Fiscal stimulus in Budget 2016-17: Any fiscal stimulus to revive demand in the forthcoming budget are key domestic issues for the Indian market over the next few weeks.
2. The government can use the forthcoming budget and budget session to announce certain executive decisions that may boost demand and pass pending legislations (GST bill).
3. The central and state governments are steadily implementing reforms that may achieve sufficient critical mass to revive private investment over the next 3-4 quarters.
4. The government may find it difficult to achieve its FY2017 GFD/GDP target of 3.5 per cent without raising significant funds (Rs 65000 crore) from divestment of its stakes in government-owned companies. The steep fall in stock prices of government-owned companies and private companies where the government has minority stakes will make it harder for it to raise money. However, it can try a few things to improve valuations of the companies and also achieve other objectives. A 10 per cent stake sales in CIL and ONGC will alone fetch the government Rs 60,000 crore, almost the entire ‘required’ divestment amount for FY2017. The government can also seek dividends from certain cash-rich companies such as Coal India.
5. The rationalization of cess on crude (now equal to one-third of crude prices) and natural gas prices will boost the earnings and valuations of upstream companies. A 1-2 per cent cut in corporate tax rate may shore up overall earnings.
6. Domestic market valuations have become more reasonable following the recent correction.