We are close to the bottom in market, says Raamdeo Agrawal

Even though market veteran Raamdeo Agarwal touts the recent market rout, which has pulled the Nifty 16 percent off its all-time highs as a healthy correction, he feels a further fall would be overshooting the downside in the market. He said that the Indian benchmarks are "close to the bottom".

"Every correction is a new story, and that is the beauty of the market. Now, we are correcting because earnings profile is slowed down, but it is not broken. Every aspect of tightening by the regulators have happened. And now, there was an election, so there's a delay in the government expenditure and all. But all of that has passed," Agarwal said in an interaction with CNBC-TV18.

To that effect, Agarwal highlighted the sharp easing of Nifty's PE multiples from 23-24x to now less than 20x, falling below its 10-year average. On the other hand, Agarwal cautioned against another major headwind facing the market--the divergence between large-caps and the small and mid-cap counterparts.

Over the past five years, the Nifty has risen by about 95-96 percent, while mid-cap stocks have surged by a staggering 177-180 percent. "The gap between them is quite significant. Had the midcaps rallied around 100 percent, then the difference would be understandable, but this excess gain suggests an imbalance. For this gap to normalise, either large-cap stocks need to catch up, or mid-caps must correct—whether through time consolidation or an actual correction. The divergence between mid and small caps also seems too wide," Agarwal said.