Even as the talks of global growth slowdown are widespread, the extent of growth slowdown is still a big unknown and not fully factored in the market, said brokerage firm Phillip Capital in a note.
"We are in a phase where global growth slowdown is well anticipated due to aggressive monetary tightening and geopolitical risks. What is not known is the timing and the extent of slowdown or recession in various economies," said Phillip Capital.
"Globally, (excluding Russia/HK), equities have largely surpassed pre-covid levels, Europe is still trailing, US and India are 12% and 47% ahead, respectively. The spike in interest rates in a short span of time is a looming threat on the economies, particularly the leveraged ones," said the brokerage firm.
Phillip Capital underscored that Nifty is currently trading at 19 times-19.5 times FY24 earnings per share (EPS) of ₹950-920.
"We have been estimating FY24 EPS in the range of ₹930-950 since March 2022 when consensus was ₹1,050. Currently, we retain our neutral stance on Indian equities; downside risk will open as global monetary tightening continues, triggering global growth/earnings slowdown," said Phillip Capital.
The brokerage firm believes if the global slowdown is avoided, Indian equities will trend higher. However, until that clarity emerges Nifty may be rangebound.
"FY23 was always expected to be a tough year – it is panning out in line. We retain our March 2023-September 2023 target at 17,800-18,800," said the brokerage.
The brokerage expects India’s outperformance to sustain due to extremely favourable long-term fundamentals as compared to any other economy, but the near and medium-term trends will likely be soft owing to higher interest rates, tight liquidity (domestic and global), weakening rupee, pent-up demand in FY22/23, and slowing global growth.
However, currently, Phillip Capital said it is not expecting a serious slowdown in India.
Disclaimer: The views and recommendations given in this article are those of the broking firm. These do not represent the views of MintGenie.
