A Jefferies report expect Indian stock markets to bottom before February 7

New Delhi: According to a Jefferies study, Indian stock markets are predicted to bottom out before February 7.

The study also said that the Reserve Bank of India (RBI) would continue to support growth at its monetary policy meeting and that the next Union Budget will not include any surprises.

Assuming no tax surprises in the budget and a pro-growth RBI meeting, it said that the Nifty should bottom out before February 7th. In the anticipated short-term surge, rate-sensitive investors should do well.

According to the research, rate-sensitive companies should do well during the anticipated short-term surge.

The current decline in the Indian stock market has lasted 126 days, making it the second longest in the previous ten years. The latest correction, which is down 15%, is consistent with the typical falls seen during market pullbacks over the last decade.

But given that both local and international indicators seem to be leaning in the direction of a recovery, this stage of the market decline may soon be done.

According to Jefferies, the performance of the Indian market has often followed emerging market (EM) movements, and this pattern is recurring. The MSCI Emerging Markets (EM) Index has already recovered by almost 5% after correcting by 12% between its October 2024 top and January trough. The EM Index’s recovery is seen as a promising lead indication for India, indicating that the country’s market is probably about to bottom out as well.

Furthermore, there are indications that the U.S. Dollar Index (DXY) is beginning to decline, which increases hope for an Indian market rebound.

According to the analysis, the anticipated market surge may provide some short-term benefits, but when the market recovers, equity supply is anticipated to increase once again. This can restrict the market’s total returns.

Additionally, the research said that trailing returns on a 12-month basis had dropped to 7.5%, suggesting a possible slowdown in domestic inflows. The lower returns might depress investor morale and limit the inflow of domestic money into the market if the market keeps moving sideways in the next months.

In summary, a market recovery is anticipated in the near future, but it will probably be limited by slower domestic inflows and increased equity supply, which might affect the performance of the market as a whole over the course of the next 12 months.