The Indian stock market can correct up to 1,000 points if the United States falls into a deep recession, Jitendra Gohil, Director-Head Of Equity Research, Wealth Management at Credit Suisse, told CNBC-TV18 on June 27.
A steep market correction is also on the cards if global crude oil prices breach the unprecedented levels of $140 or $150 a barrel, he said, adding such a possibility remained remote for now. "Oil prices are expected to remain rangebound, unlikely to touch $140," Gohil said.
According to Gohil, the market has "priced in peak hawkishness", and here on, valuation is "going to be the key" for India.
"The froth in valuation has already settled", he said, adding that barring the IT sector, a large part in the correction of valuation has already been done for most other stocks.
"If I look at two or three years down the road, India is in a sweet spot. The corporate fundamentals of the country have improved dramatically," Gohil said.
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"We think that India's valuation will remain a bit more elevated but we think that it's a good time to enter the market if we see more correction."
"The risk is that if oil goes to $140 or $150-plus—that is not our view—but if the oil starts to shoot up, or if the US goes into a deep recession, we might probably see a 1,000-point correction from this level," he said.
Gohil's statement comes around a fortnight after the market witnessed a major dip, with the investors cumulatively losing around Rs 7 lakh crore on June 13. The benchmark indices had plunged by 3 percent, which analysts had attributed to the inflation peaking to 8.6 percent in the US, marking a 40-year high. The high rate of inflation signalled that the Federal Reserve was likely to hike the key lending rate more aggressively.
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