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HomeBusinessIndian Stock Markets Likely To Bottom Out Before February 7: Jefferies Report

Indian Stock Markets Likely To Bottom Out Before February 7: Jefferies Report

New Delhi [India]: Indian stock markets are expected to bottom out before February 7, as per a report by Jefferies. The report also indicated that the upcoming Union Budget is unlikely to bring any surprises, and the Reserve Bank of India (RBI) is expected to maintain a pro-growth stance in its upcoming monetary policy meeting.

Key Insights from the Report

The report stated:
“Nifty should bottom out before 7th Feb assuming no tax-surprise in the budget & a pro-growth RBI meeting. Rate sensitives should do well in the expected near-term rally.”

Current Market Trends and Expected Recovery

  • The Indian stock market has been undergoing a correction for 126 days, making it the second-longest correction of the past decade.
  • The current 15% market decline is in line with previous corrections over the last ten years.
  • However, global and domestic factors suggest that the downturn may soon end, paving the way for a recovery.

Emerging Market Trends and Impact on India

  • Historically, Indian markets have mirrored emerging market (EM) trends.
  • The MSCI Emerging Markets (EM) Index, which saw a 12% correction from its October 2024 peak to its January bottom, has already rebounded by 5%.
  • This recovery in EMs is considered a positive lead indicator for India’s market turnaround.
  • Additionally, the US Dollar Index (DXY) has weakened, further fueling optimism for a market rebound in India.

Short-Term Rally vs. Long-Term Market Outlook

  • The expected near-term rally is likely to benefit rate-sensitive stocks, per the Jefferies report.
  • However, equity supply is expected to rise once the market bounces back, limiting overall returns.
  • A potential slowdown in domestic inflows is also a concern, as 12-month trailing returns have fallen to 7.5%.
  • If the market remains sideways, lower returns could dampen investor sentiment, impacting domestic capital flows.

Conclusion

While a short-term market recovery is expected before February 7, long-term market performance could be capped by rising equity supply and slower domestic inflows. Investors should remain cautious as market conditions evolve over the next 12 months.

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