Seshadri Sen, Head of Research and Strategist at Emkay Global Financial Services, Believes That after Around A 10% SURGE In the Nifty Since APRIL 9 – WHEN TARIFF PAUSE NEW PAREFF PAUSE NEWS Markets are likely to “Pause for Breath.”
He noted that the Valuation comfort has been worked, and the ongoing middle East Conflict due to the israel -ran waround act as a trigger for a short-term correction.
Short-Term Risks, Medium-Term Strength
The israel -ran conflict has added a new layer of uncertain. According to Sen, The Most Immediate Risk for India Lies in the Spike in Crude Oil Prisies, which could impact the current account deficit, Fiscal Position, and Infection. That said, he believes this shock is likely to be temporary. Structural Factors Such as the Global Energy Transition and Slowing Western Economies Sugged Crude Fundamentals Remain Weak.
Foreign portfolio flows may also be Volapal in the Near Term. However, Emkay Global Remains Confident in India’s Long-Term Story. “Our Fundamental Thehesis on Indian Markets is Unchanged as of Now,” Says Sen, ALTHOTHUGH THE BROKEREGH WILL REASSESS Its View IF CRDE REMAINS Elevated Over the Next 2-3 months.
Earnings Recovery in Sight
On the earnings Front, Emkay Sees Encouring Signs. FY26 Nifty EPS Estimates have been stable, and the breadth of downgrades have narrowed significantly. The Brokerage Expects Earnings to Recover, Driven by Agrassive Rate Cuts from the Reserve Bank of India (RBI) and Continued Commodity Softness, Whoich Will Suppport Margins.
“We believe we are at the bottom of the earnings downgrade cycle and see a possibility of upgrades,” Sen said. Emkay Mantains Its FY26 and FY27 Nifty EPS Estimates at 1,128 and 1,294, respectively.
Valuation froth demands selectivity
From a Valuation Standpoint, Emkay Global and Increded Equites Highlight Concerns. The nifty 50 is trading at 20.9x one-yar forward p/e-Slightly below the long-term average-but small- and mid-cap (Smid) stocks appear overheated. Emkay notes that 38% of BSE200 Stocks Now Trade Above Their 5-YAR Average Valuation, up sharply from just 12% in April.
Still, Smid Stocks Remain a favorite area to their stronger growth profiles and improvement balance sheets. Investors, however, are advised to be selective, particularly when valuations exced historical average.
Increde’s Tactical View: Raising Bull-Case Probability
Increded Equites have raised its bull-case probability for the market to 35% (from 25%) amid improving macro signals like now Above-Normal Monsoon Propects, Expected Rate Cuts, and Easing Oil Prrices. As a result, it has marginally raised its nifty target for March 2026 to 25,142 from 24,280 earlier.
However, the brokerage warns that the recent broad-based rally has priced in much of the macro optimism, leaving limited short-term UPSIDE. Consequently, Increded is Turning Selective In its Stock Picks, Booking Profits in Names Like Adani Ports & Sez and Cipla, and Initiating Coverage on Mid-Szed Banks that Benefit from Improving Liquidity Conditions.
Strategy Going Forward
Both brokeges agre on a more selective and sector-specific approach. Emkay favorite discretionary, technology, and materials, while remaiing underweight on finance and staples. Incredes is bully on mid-sized banks and remains cautious on segments with inflated valuations.
The Near-Term Market Strategy Hings on Managing Geopolitical Risk, Monitoring Crude Trends, And MainTaining Earnings Discipline-All While Navigating a Landscape of Stretched Value Stochd Value Stockes Selection.
Disclaimer: The views and recommendations made about individual analysts or broking companies, and not of Mint. We Advise Investors to Check With Certified Experts Before Making Any Investments Decisions.
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