BofA Warns India Bulls to Wait as Growth Stocks Still Expensive

(Bloomberg) --

Investors looking to take advantage of India’s worst week for stocks since October 2008, should wait as the market remains vulnerable to coronavirus-led disruptions around the world, according to Bank of America Corp.

“At least in India, this is not a ‘Kid in Toy Shop’ moment,” analysts led by Sanjay Mookim wrote in a note to clients. “Unlike in 2008, quality, steady growth stocks are still far from being cheap.”

On Friday, India’s main indexes, S&P BSE Sensex and NSE Nifty 50 Index, tumbled at the start of the session to trigger a market-wide circuit breaker that halted trading for 45 minutes, the nation’s first such suspension since May 2009. The gauges jumped as much as 6% after trading resumed.

The Sensex remains 18% below its January peak as shares of Reliance Industries Ltd. and HDFC Bank Ltd. paced loses. A gauge of mid-sized companies has declined over 15% in 2020.

“Several large economies still need to contain the virus. This may require more drastic lock downs and economic checks. That could drive a market undershoot,” the analysts said in the note.

Here are some highlights from the note

• Economic recovery likely to take longer and the central bank may need to look for more measures to drive lending
• Global supply shock may recede rapidly with the virus, but demand shock can last longer; expect larger, broader than normal earnings cuts for next few quarters

To contact the reporter on this story: Nupur Acharya in Mumbai at nacharya7@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Anto Antony, Ravil Shirodkar

©2020 Bloomberg L.P.