valuation: Growth, valuation worries may keep lid on optimism in Zomato IPO week
Concerns that existing vaccines from Pfizer and Moderna, which have been widely used in the developed world, may not be potent enough to deal with the Delta variant — first found in India — have led to doubts over sustainability of the current global growth momentum.
“The biggest risk to GREED & fear’s pro-cyclical view has always been that the vaccines cease to be effective against the new variants, such as the Delta variant, concerns about which are growing,” Jefferies Global Equity Strategist Christopher Woods said in a recent note.
In addition to that, the possibility of slowing growth in the Chinese economy is also forcing investors to dial back their optimism for global growth, said analysts. China earlier today cut its policy rate to further support growth in the economy.
Growth concerns dominated market action this week and domestic benchmark equity indices corrected on Thursday and Friday amid a rally in US Treasury bonds, usually seen as haven asset. Nifty50 and BSE-Sensex ended 0.2 per cent lower each.
Interestingly, base metal producers were among the biggest winners of the week, as the Nifty Metal inex closed nearly 2 per cent higher followed by pharma index. The biggest winners of the week, however, were real estate stocks on the perception that reopening of the economy would further boost demand for residential property going ahead.
The broader market continued to outperform as the Nifty Midcap 100 and Nifty Smallcap 100 indices ended with gains of over 0.5 per cent for the week.
“Currently, it appears that the aggression in volumes has softened and India VIX is also more or less in the same range. So only if Asia and the developed markets witness a pivotal correction in the coming week, can the Indian market make an intermediate top,” said Nirali Shah, head of equity research at Samco Securities.
Positioning by traders in the futures & options segment, also, hinted at lacklustre trading next week, as traders sold both the out-of-money Call and Put options of the Nifty50 index. However, with the June quarter earnings season in full swing, market participants expect stock-specific action to dominate the proceedings.
Plus, the much-awaited Zomato IPO opens next week and that should create some excitement on Dalal Street.
“Current valuations, while not expensive, are not lucrative from a risk-reward perspective. Consistent earnings delivery against expectations is critical for further outperformance,” said Siddhartha Khemka, head of retail research at
Service.
Source link
