Indian Stock Market Lacks Value Despite Crash; the Era of Narrative Stocks Near Its End, Says Kotak Securities
No Value in the Indian Stock Market?
The Indian stock market has seen a sharp correction from its peak levels, scaled in September 2024, which has brought the valuation of several stocks and sectors significantly lower. However, despite the recent sharp decline, brokerage firm Kotak Securities believes that the Indian stock market lacks value at the current juncture.
Breaking News: Sensex Crashes 13,000 Points from Peak: 5 Key Factors Ailing the Market
Kotak Securities argues that most parts of the domestic market are expensive on an absolute basis or on a historical basis. The valuation bubble has burst, and the narrative of strong inflows has not proved to be a reliable indicator of market performance.
How Did We Get Here?
The market benchmark Nifty 50 has plummeted nearly 16% from its peak of 26,277, which it hit on September 27, 2024. On a monthly scale, the index has been down since October. The reason behind this sharp decline lies in the massive foreign capital outflows. Since last October, foreign institutional investors (FIIs) have sold Indian equities worth over ₹3 lakh crore in the cash segment.
What’s Driving the Outflows?
The factors driving FIIs away from Indian markets include the stretched valuations of the Indian stock market, attractive valuations in China and Japan, weak earnings of India Inc., signs of economic growth losing momentum, a depreciating rupee, a strengthening dollar, and concerns over a major trade war.
Is the Era of Narrative Stocks Over?
Expressing caution about ‘narrative’ stocks from sectors such as defence, railways, etc., Kotak Securities highlighted that many such stocks are trading at unfathomable valuations despite the 30-50% correction in their stock prices in the past few months. The brokerage firm believes that investors waiting for a revival in these narrative stocks may be in for a rude shock.
A Warning from Kotak Securities
Investors waiting for a revival in ‘narratives’ and a rebound in ‘narrative’ stocks may want to note the following: (1) the cat may be already dead, (2) the cat will likely be dead if it is dropped from a sufficient height (despite a cat’s fabled nine lives) and (3) the image will be too ghastly to imagine.
The Verdict
The era of narrative stocks is near its end, and investors must be cautious when venturing into these sectors. The dip in the Indian stock market may have created opportunities for investors, but it is crucial to approach the market with a healthy dose of skepticism. Kotak Securities’ warning is a reminder that the market is not ready to recover just yet, and investors must be patient and cautious in their investment decisions.
Read More:
- Sensex Crashes 13,000 Points from Peak: 5 Key Factors Ailing the Market
- How to Make the Most of the Market Correction
- Retail Investors Have Given Up, But Here’s Why You Shouldn’t
About the Author:
Nishant Kumar is a seasoned financial journalist with over 10 years of experience in the financial industry. He has been covering the stock market, economy, and business for various publications and has also worked as a financial analyst for multiple firms.
Disclaimer:
This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
Stay Informed:
Catch all the Latest Business News, Market News, and Breaking News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Live News Daily is a trusted name in the digital news space, delivering accurate, timely, and in-depth reporting on a wide range of topics.