The Indian stock market is expected to open on a flat note on Tuesday amid weak global markets. However, analysts believe that the market will remain volatile due to some negative global cues. Analysts said valuations of Indian stocks are also at higher levels, which needs to be improved.
NSE’s volatility index India VIX rose over 14 per cent to 17.49 on Monday, indicating panic and fear among investors coupled with the uncertainty.
One of the biggest hurdles for global markets is trouble at the highly leveraged asset giant China Evergrande. The company faces default risk on an $80 million bond coupon payment, which is due on September 23.
Amid heightened volatility, global markets improved on Monday on fears of infection around the Chinese developer. Risk aversion was seen in the markets, with household chemicals and metals stocks falling sharply.
Traders also became cautious ahead of US Federal Reserve and ECB meetings this week, awaiting indications of when central banks will begin to roll back their monetary stimulus and start raising interest rates.
SGX Nifty indicates a steady start for the Indian markets. At 8 am, SGX Nifty rules at 17,435, while Nifty September futures close at 17,386.65. Overnight US stocks also fell by about 1.7-2 per cent. While most Asian-Pacific markets are ruling flat, Japan’s Nikkei is down more than two percent in opening deals on Tuesday.
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However, the relief is that despite broad base selling, FPIs remained net buyers on Monday, indicating their confidence in the recovery of the Indian economy. “We view the higher P/E premium of Indian equities as warrants given to better fundamentals, and believe relative valuations can be raised until earnings increase. We expect these higher valuations to be supported by a good recovery in the second half of the year. Therefore, we recommend investors to maintain investment in equities, albeit with a low portfolio beta,” Credit Suisse Wealth Management said in a report.
According to Goldman Sachs, India’s stock market could exceed $5 trillion within three years to become the fifth largest in the world.
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