New Delhi, Stock market: Since the beginning of the new year, there is a boom in the Indian stock market. Whether this momentum will continue or not, the answer is still in the future. But DSP Mutual Fund, a $ 14 billion fund managing firm, feels that the alarm bells have been rung for the Indian stock market. The fundamentals of the stock market are weak and it can collapse at any time.
A note made by DSP Mutual Fund states that investors should be careful. Quoting Bob Farley’s 10 rules of trading, the note said that the market may not be considered strong due to rally in some stocks. This is a sign of a narrow market. DSP Mutual says that there is weakness in the Indian stock market. The expansion of the decline in the market is increasing alarmingly.
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Rally in just a few stocks
According to a news in Economic Times, according to a news, DSP Mutual Fund says that the market is considered broad and strong when a lot of stocks move up. When the market rises due to the rise of some stocks, we cannot say that the market is strong. Looking at the NSE 500 Index (NSE 500) from this point of view, it has seen a wide decline. The situation is even worse than its decline in March 2020. This shows that the negativity in the index is high. It stands on a weak foundation. It is in worse condition than the previous phase of correction. Only 16 per cent of the Nifty 500 Index (NSE 500) stocks are above the 50 Days Moving Average (50 DMA). According to DSP Mutual Fund, this signals alarm bells
Market is standing on weak foundation
In its note, DSP Mutual Fund has said that due to incremental growth and steady inflows from institutional investors, India has earned a valuation premium over its competitive markets. Presently the premium is at record level. Historically, this has happened because of the performance of Indian stocks. This also indicates a weak foundation. This too is a warning sign for Indian equities.
As soon as Indian companies start releasing their December quarter figures, investors will also expect better performance from them. The general opinion is that Nifty Earning Point will double by March 2023 as compared to March 2020. But the question is, will this happen?
If corporate growth falls, the market will derail
Corporate earnings have not been able to pick up the pace that the market expects for the past several years. The Nifty EPS growth change between FY 2011 to FY 2020 has averaged 3.8 per cent year-on-year. In the year 2021, the growth change became 20 percent. This has happened for the first time since 2011. The biggest question is, will Corporate India be able to deliver such strong earnings? Normally a market that trades at 18x PE will have to trade at 19x in FY2023. If for some reason this earnings growth derails, then the equity market may fall.
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Tags: Nifty, stock market