The correction which took the index below crucial support levels is not normal, says Sandeep Bhatia, managing director and head of equity India at Macquarie Group
The Nifty has seen a cut of nearly 300 points in just five trading sessions which left investors in a state of disarray. The index, which was on track to hit 12,000 just last week, is now hovering around 11,500-levels.
The correction which took the index below crucial support levels is not normal, says Sandeep Bhatia, managing director and head of equity India at Macquarie Group in an interview with CNBC-TV18.
It is not normal because it is a result of external factors which are contributing to the fall. “Dollar has gained strength, US Treasury yields have hardened, and the entire basket of emerging market currencies have come under pressure,” explains Bhatia.
The Indian currency came within a kissing distance of Rs 72/USD on Wednesday. Technically, the rupee has been weak since the start of the year from the lows of 63.20 against the US dollar to an all-time high of Rs 71.97 against the US dollar.
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Tracking rupee weakness and other global factors, Bhatia is of the view that the correction which we are witnessing now could well continue for a couple of months. But, that doesn’t mean that India story is over.
Bhatia, who has an experience of over 25 years in equity markets, says whenever this kind of corrections happen it gives investors good entry points. The last such entry point was when the government announced demonetisation.
“We are getting an opportunity again and it looks like we could correct further from current levels. I won’t be surprised if the Nifty hits 10,800, but investors should turn buyers in case Nifty corrects by over 5 percent in the next couple of months” added Bhatia.
Earnings Growth
Commenting on the earnings growth, Bhatia said it is finally visible and this is not the time to throw in the towel and say that market is done.
“Our estimates say, Nifty’s earnings growth is around 17-17.5%, and it could go up. I would think that the top end of the index is somewhere around 12,500 but it is unlikely to come in quick time, but clearly this is a market which is going to be much wider in terms of participation and much stronger in terms earnings growth,” explains Bhatia.