Jefferies’ Chris Wood says Nifty's worst-case scenario could be much lower at 14,000

The markets have taken a downturn due to rising inflation and then the subsequent rate tightening by central banks across the world, including the Reserve Bank of India (RBI), which raised lending rates by 40 basis points (bps) last week. Along with this, the rising crude prices as a fall out of the Russia-Ukraine war and the rupee depreciation against the dollar have added to the outflow.

“RBI policy in last couple of years has been very dovish. (I believe) the rate hike could have been done earlier. The currency (rupee) would have been more vulnerable had RBI not raised rates last week,” he said.

So, what should one expect in terms of further rate hikes this year? Wood sees the monetary tightening in India to be lower than that of the US.

“My guess is 200-250 basis points of tightening is enough, and the bond yields have already risen quite a lot. So, to me, this is the year of consolidation in the market where you want to be adding to your favourite stocks on corrections,” he said.

For the long-term though, Wood is bullish on India calling it "the best equity story on a 10 year view, not just in Asia, but globally."

India has seen more money being pledged in manufacturing and capacity expansion in the last 12 months –- at a little less than Rs 20 lakh crore -– than in any of the past seven years, according to data from Goldman Sachs.

"India has one huge advantage over the other Asian nations who are getting investment outside Vietnam, Thailand, Malaysia. India has this huge domestic market... If India can come up as a coherent program to attract multinational manufacturing, I believe the access to the domestic market gives it a huge opportunity over the next 10 to 15 years. And so, you now have such a program in India."

Wood opines that the US Fed has lost some credibility as the balance sheet expansion due to the quantitative easing was enormous and that rates should have been hiked in November itself.

He expects the market leaders in the US, like FAANG stocks (also referred to as MANGA stocks after changes in company names) -- Meta (Facebook), Amazon, Apple, Netflix and Alphabet (Google) – will see more corrections.