Consumption Slowdown, Higher Valuations May Drag Nifty Further, Says Emkay Global
The National Stock Exchange building in Mumbai. (Photo: BloombergQuint)

Consumption Slowdown, Higher Valuations May Drag Nifty Further, Says Emkay Global

The Nifty index may fall further, dragged by the consumer companies hit by a demand slowdown and stocks trading at higher valuations, according to Emkay Global Financial Services.

“The valuations are not very comfortable,” said Suveer Chainani, chief executive officer (institutional clients group) at the firm. Global investors are underweight on India because of higher valuations, he told BloombergQuint during an interaction ahead of the financial services company’s event ‘Confluence’ scheduled this week.

While Sunit Tirumalai, head (research and strategist) at Emkay, agreed, he also said that there might be a further downside to the 50-stock gauge because of receding demand across consumption segments.

“There is no immediate trigger for things to change for the next two quarters. The government’s plan to have consumption stimulus or investments will take time to have multiplier effects,” said Tirumalai.

India’s equity benchmarks have dropped around 10 percent from their record highs in June after the budget proposed to levy a higher tax surcharge on the nation’s super-rich. Overseas investors have pulled out Rs 17,941 crore since July to date, according to data available on the National Securities Depository Ltd.

Emkay’s ‘High Conviction’ List of Stocks

Large Cap: Over-Weight

  • Cipla Ltd.
  • Divi’s Laboratories Ltd.
  • HDFC Bank Ltd.
  • Housing Development Finance Corporation Ltd.
  • ICICI Bank Ltd.
  • ICICI Prudential Life Insurance Company Ltd.
  • Larsen & Toubro Ltd.
  • Marico Ltd.
  • NTPC Ltd.
  • Tata Steel Ltd.
  • United Breweries Ltd.

Mid Cap: Over-Weight

  • Gulf Oil Lubricants India Ltd.
  • IPCA Laboratories Ltd.
  • Jubiliant Foodworks Ltd.
  • Radico Khaitan Ltd.
  • Sterlite Technologies Ltd.
  • Varun Beverages Ltd.

Large Cap: Underweight

  • ABB India Ltd.
  • Ashok Leyland Ltd.
  • Dr. Reddy’s Laboratories Ltd.
  • Eicher Motors Ltd.
  • L&T Finance Ltd.
  • Punjab National Bank
  • United Spirits Ltd.
  • Wipro Ltd.
  • Yes Bank Ltd.

Watch the full interview here:

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