- Nifty 50 drops amid market fatigue and economic growth concerns.
- Nomura revises its stock picks, favoring Axis Bank and consumer stocks.
- NBFC sector remains uncertain, but select stocks show strong fundamentals.
The Indian stock market is experiencing fatigue as the Nifty 50 index struggles to maintain momentum after a strong rally. A combination of lower-than-expected economic and earnings growth has led to a correction, bringing valuation multiples down from their September 2024 peak.
Nomura India has updated its stock recommendations, adding Axis Bank while removing Hyundai Motor India and Nippon India AMC. It sees modest upside potential for Nifty, expecting a 4% rise by year-end.
Nifty Volatility: Investor Sentiment Wavers Amid Market Uncertainty
The NSE Nifty index has faced a decline as investors adjust their expectations in response to economic and earnings slowdowns. Market fatigue has set in following a prolonged rally, prompting investors to reassess valuation levels. At its peak in September 2024, the Nifty’s one-year forward valuation stood at 21.3 times earnings, which has now reduced to 19 times due to slower-than-expected growth.
Nomura’s latest strategy highlights a shift in focus toward selective stock picking rather than broad-based investment. The firm sees opportunities in the consumer sector, particularly Marico, HUL, and ITC, given their strong fundamentals and anticipated demand recovery. Meanwhile, concerns remain over the financial sector, particularly in the non-banking financial company (NBFC) segment.
NBFCs are expected to face headwinds in FY25, with asset quality concerns weighing on investor sentiment. However, Nomura maintains a positive stance on select companies like Shriram Finance, Aadhar Housing Finance, and LIC Housing Finance due to their robust fundamentals and growth potential. The overall financial sector remains a mixed bag, with careful stock selection being key in the current market climate.
While large-cap stocks experience pressure, mid-cap and small-cap stocks have shown some resilience. Several stocks, including Denta Water and Infr, Shree Rama News, and TCPL Packaging, have reached fresh 52-week highs. However, market analysts remain cautious about the sustainability of these gains, given the broader economic uncertainty.
The Indian stock market is navigating a phase of correction, with valuation concerns and earnings slowdowns influencing investor sentiment. While select opportunities remain, a cautious and strategic approach to stock selection is crucial for navigating the evolving market landscape.
“Markets go up in stairs and down in elevators.” — Charles Dow
