A security guard walks past the National Stock Exchange building in Mumbai, India, on Feb. 9, 2018.
Danish Siddiqui | Reuters
Indian markets may be on edge, but investment bank Nomura says concerns about growth, consumer confidence and rising inflation could still weigh on equities.
“Macro uncertainty is actually a concern for the markets,” Saion Mukherjee, the bank’s head of equity research in India, said during a virtual session at the Nomura Investment Forum Asia 2021 on Wednesday.
Indian stocks have risen sharply this year despite the economic impact of the coronavirus pandemic, which pushed the country off its growth trajectory last year.
The benchmark Nifty 50 index, which represents the weighted average of 50 of the largest Indian companies on the National Stock Exchange, is up 11% since Wednesday. On the other hand, India’s GDP for the fiscal year ended March 31 is estimated to have contracted by 7.3%, compared to a growth of 4% in the previous 12 months.
“I don’t think there’s a strong correlation between GDP growth and earnings growth, at least not in the short term,” Mukherjee said.
Microeconomic factors such as corporate earnings look “relatively better” right now, he said. Mukherjee added that there is enough buffer to allow corporate profits, which have declined slightly due to the pandemic, to bounce back strongly. Nomura predicted that banks and metal stocks will boost profits on the Nifty.
Mukherjee shared how the investment bank navigates this environment. Here are Nomura’s top stock picks and sector calls: