Believes foreign flows won’t improve in the near term, but earnings momentum is better than rest of Asia.
The Indian market witnessed a stellar run since the start of the year, with the Sensex and Nifty returning 20-22 percent.
Having said that, the Street has experienced a few phases of correction, but not a definitive one. Experts have repeatedly pointed that these are not the actual correction.
“I think it is too early to say that this is the beginning of a major correction because by the time Q3 comes through, demonetisation will make the year-on-year (YoY) comparable for Q3 looks good. The big unknown is how long will the Indian consumer hang in there… if retail NPAs, housing finance NPAs are alright in Q2 then I do not think I will be calling this the beginning of the big correction just yet,” Saurabh Mukherjea of Ambit Capital had told CNBC-TV18 in an interview on September 25.
Going forward, CLSA believes that the market will be subdued in the near term. And this will be possible on the back of equity supply and weak FII flows. In fact, it expects foreign flows to not improve in the near-term.Having said that, the earnings momentum in rest of Asia is far better than that in India, it added. It has a reduce weight on Maruti and add rating to M&M and pharmaceuticals in the model portfolio. Meanwhile, long term optimism on housing-led economic recovery remains intact.