The Indian market has rallied in the recent past and has been much more resilient compared to its emerging market and global peers. However, Rupal Agarwal, Senior Research Analyst - Asia Quantitative Strategy at Bernstein, still remains cautious about the Indian markets’ story due to risks posed by macroeconomic factors.
“We still remain a little bit more cautious. I think the macro risks still persist….the Indian market has been relatively much more resilient and there have been some external factors to it along with the domestic story being strong,” said Agarwal in an interview with CNBC TV18.
On Monday, benchmark indices opened 0.8 percent higher and both the Sensex and Nifty rose for the third consecutive session. The recent monthly data on purchasing managers’ index (PMI), goods and services tax (GST) and direct tax numbers, and automobile sales were better than expected. This, along with continued buying by foreign investors, has improved sentiments for the Indian market among investors.
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On the global front, the analyst expects markets to remain volatile as the US Federal Reserve continues to aggressively hike interest rates in order to bring down inflation in the world’s largest economy.
The US Consumer Price Index (CPI) data, due on Tuesday (September 12), is expected to show a rise of 8.1 percent in August on a year-on-year basis, compared to an 8.5 percent rise for July.
Agarwal believes upbeat economic data in India along with underperformance by other economies have augured well for the domestic economy.
“Yes, India has been very resilient but broadly the trends have been very similar to the US markets…the entire rally since June has been completely in line with the US,” Agarwal added. “To me, it looks unlikely that markets are going to rally very strongly”.
Meanwhile, Agarwal also expects another downside in markets, which could beat the previous lows, on the back of global recession risk, aggressive tightening of monetary policy by the US Fed and an elevated dollar index.
“Markets are not completely pricing in macro risks,” Agarwal added.