India witnessing a bear market rally, EMs underperforming: Bernstein
Garre remains optimistic about the Indian market. He believes that financial stocks in particular are poised for growth as the market rebounds. This is likely due to the fact that banks and other financial institutions are key players in India's economic recovery.
In the last two weeks, the Sensex and Nifty have gained four percent each, marking the biggest two-week gains in eight months. Last week (being a three-day truncated week) saw the Nifty 50 end higher on all three days and just a point shy of the 17,600 mark. In the 11 trading sessions since the March 20 low of 16,828, the index has risen 771 points.
According to Venugopal Garre, MD at Bernstein, India is currently experiencing a bear market rally.
“If you were to see the last 18-20 months, India has been broadly flat-lining, pretty much in a rangebound sort of a market. In some way, you can call it a bearish market from a global perspective,” he said.
“In bear market rallies from time to time, you tend to see these sorts of rebounds and then sell-offs. Normally, we tend to ignore quite a few of these bear market rallies if they are purely valuation led. The reason why we decided to call a rebound this time was large because it was not just pure valuations,” he added.
He believes, six months of underperformance relative to EM was the most important parameter out here.
“And once we rebound, we essentially go back to where we were in early January, which is that 18,000-18,500 for Nifty 50. To some extent, since EMs, in general, outside of India, not necessarily in a great situation as well so what it means is that there'll be a narrowing of that underperformance, which is the most important call out here that we are trying to make,” he explained.
Garre remains optimistic about the Indian market. He believes that financial stocks in particular are poised for growth as the market rebounds. This is likely due to the fact that banks and other financial institutions are key players in India's economic recovery.
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