However, as bears reigned over markets and wiped out significant amounts from investors’ portfolios, valuations may have quietly improved. The market correction since the beginning of the war has brought Nifty’s valuations down to fair levels, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He added that Nifty is now trading at about 19 times, which is lower than the last 10-year average of 22.4 times.
Aakash Shah, Technical Research Analyst at Choice Equity Broking, also said that the ongoing correction in Nifty 50, largely triggered by geopolitical tensions and a spike in crude oil prices, has indeed cooled off valuations from previously elevated levels.
Has Nifty hit its bottom?
Aakash Shah however noted that it is premature to conclude right now that the market has hit a durable bottom. “The Nifty has corrected approximately 12-14% from its recent highs…The index continues to trade below its short-term moving averages, indicating that the trend remains fragile and lacks strong bullish confirmation,” he said.
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Ajit Mishra, SVP Research at Religare Broking, also said that it would be premature to conclude that the Nifty has formed a durable bottom or is at a “perfect buying level”. “The lack of meaningful cooling in volatility also indicates that the market has not yet transitioned into a stable phase,” he added.
Why caution is warranted
Vijayakumar from Geojit Investments cautioned that in case India’s macros take a hit due to this energy crisis, valuations may again decline, factoring-in the feared hit to earnings growth in FY27. “The Indian economy is strong enough to absorb the shock if the war ends, crude cools down and gas availability becomes normal. But if the war prolongs, crude remains elevated for months together, and gas availability constraints continue, the stress on India’s macros will be significant and the market will discount that. In brief, everything boils down to how long the war will last,” he said.“While valuations have turned fair, it is still premature to call a definitive bottom. Technically, the market is in a corrective phase with intermittent pullbacks. Strategy-wise, investors should avoid aggressive buying and adopt a staggered or wait-and-watch approach, as the current phase appears to be consolidation rather than a confirmed bottom formation,” said Shah from Choice Equity Broking.
Stock markets crashed on Friday, with the Sensex plunging nearly 1,700 points and Nifty closing below 22,850. The decline followed a strong two-day rally of over 3.5% in the benchmarks. A record-low rupee, along with fading hopes of a de-escalation in the Iran–US conflict, weighed on sentiment and brought bears back to Dalal Street.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)