Markets are in for a reasonable correction, says Demeter Advisors founder
Ashwini Agarwal, Founder & Partner, Demeter Advisors, said at the moment he does not think there is fuel for a Nifty 50 rally to 21,000. He also said he believes the market's single largest exposure is pharma right now in terms of a sectoral exposure.
Indian markets are in for a meaningful correction, and it could be a time correction as well, as per the estimates of Ashwini Agarwal, Founder & Partner, Demeter Advisors.
"We've had a very sustained run from the end of March. It's almost three and a half months long, which is very long as a minor bull cycle goes, and we haven't had any meaningful correction. During this period, the narrative has significantly changed in India's favor in the global context, this has obviously attracted a lot of foreign capital," he said.
The earnings direction has either kept pace or is falling short of expectations, Agarwal said. "Even if you look at the June quarter results that have been released till now, I fail to find too many spots outside of banks and financials where there have been meaningful positive surprises from the underlying expectations," he said.
With the global narrative starting to get a little more 'iffy' and with valuations stretching, earnings environment not delivering as many positive surprises, Agarwal is of the view that the markets are in for a reasonable correction. "Now, whether it will be a time correction, or whether it will be a deeper correction, we will find out and it'll be driven by an event that we can't forecast. But I think the fuel for a rally to 21,000 or something along those lines is not there, at least in my mind," he said.
In over the past month, the Nifty 50 has scaled to all-time highs from its March 20 low of 16,828. On June 28, it crossed the 19,000 mark for the first time, it touched its all-time high of 19,991.85 last month, and since then has been attempting to reach the 20,000 milestone.
Agarwal also believes that the market's single largest exposure is pharma in terms of a sectoral exposure. He has been positive on pharma for around one-and-a-half years now, while it has been painful as well for the sector in that period. "But it's very heartening to see the kind of earnings flow, fundamental information that's coming through about pricing environment in the US, and so on and so forth, in the midst of valuations, which have been actually quite attractive across the board. So I continue to feel fairly positive about pharma, and the earnings flow in pharma as a sector has also been on the positive side, compared to what the expectations were," he said.
He is of the view that pharma is in a position where the earnings are in line with estimates, even slightly ahead. "But i think the market sentiment was to beaten down and it's the correction in the market sentiment, which is leading to these very sharp rallies in some instances," he added.
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(Edited by : C H Unnikrishnan)
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