A guard walks past the National Stock Exchange building in Mumbai, India on February 9, 2018.
Danish Siddiqui | Reuters
Indian markets may be under pressure, but investment bank Nomura says growth worries, consumer sentiment and rising inflation could still weigh on stocks.
“Macro uncertainty is actually a problem for the markets,” Saion Mukherjee, head of equity research for the bank in India, said Wednesday during a virtual session at Nomura Investment Forum Asia 2021.
Indian stocks have risen this year despite the economic impact of the coronavirus pandemic that broke the country off its growth trajectory last year.
The Nifty 50 benchmark index, which is the weighted average of the 50 largest Indian companies on the National Stock Exchange, is up 11% year-to-date since Wednesday. On the other hand, India’s GDP for the fiscal year ended March 31st has shrunk to 7.3% compared to a growth of 4% in the previous twelve months.
“I think there is not a strong correlation between GDP growth and earnings growth, at least in the short term,” said Mukherjee.
Microeconomic factors like corporate earnings look “relatively better” right now, he said. Mukherjee added that there is enough cushion on corporate earnings, which have declined slightly due to the pandemic, to come back in vigor. Nomura predicted banks and metal stocks will add to the Nifty’s earnings.
Mukherjee shared how the investment bank is navigating this environment. Here are Nomura’s top stock picks and sector calls: