Shrikant Chouhan of Kotak Securities warns of market corrections, advocates buying on dips

Shrikant Chouhan, Head of Equity Research at Kotak Securities, emphasised that market movements are heavily influenced by global macroeconomic factors and geopolitical tensions. He noted that Indian markets are beginning to discount domestic macroeconomic conditions and liquidity. Chouhan anticipates potential time-based corrections if the markets do not breach the immediate resistance levels of 26,277 for Nifty and 85,978 for Sensex. He advises investors to adopt a strategy of buying on dips at key support levels while also recommending a reduction in cash positions at resistance levels to facilitate portfolio consolidation. Edited Excerpts:

Do you think the markets will correct till 2024-end from now or will the bullish trend continue?

The markets are depending entirely upon global macros and geopolitical developments now. I feel our markets have started discounting domestic macros and liquidity. We now need some support from global macros and ease in geopolitical tensions.

Is it time for investors to hold on to their cash positions or is the recent correction an invitation to start deploying capital into equities?

The structural growth story of India is still intact but due to rich valuations, we could see limited upside in the near term. We could see time-based corrections if the markets fail to surpass the immediate highest levels of 26,277 and 85,978 on the Nifty and Sensex, respectively. Our strategy should be to buy on dips at each major support but at the same time, it is recommended to reduce some cash positions at resistance levels with a view to consolidate the portfolio.

What are your expectations from the September quarter earnings? Are any surprises expected?

We expect Q2FY25 net profits of the BSE 30 index to increase by 5.3% YoY and 2.7% QoQ, and of the Nifty 50 index to grow by 3.7% YoY and 2.5% QoQ. We estimate the EPS of the BSE 30 index at ₹3,448 for FY25 and ₹4,039 for FY26 and of the Nifty 50 index at ₹1,063 for FY25 and ₹1,234 for FY26. In the consumer staples pack, we expect some uptick in value growth for most companies, largely led by pricing.

Are you satisfied with the October RBI MPC decision?

We see a weakening in demand conditions imparting downside to the RBI’s growth estimates for FY25/26 as inflation aligns with the 4% target in FY26. This should leave enough room for policy easing, though an upside surprise in near-term food inflation can push out the rate cut cycle start to H1CY25. Our base case, for now, continues to be a shallow rate cut cycle (75-100 bps) beginning in December.

What challenges could Indian markets face in the next quarter?

Global macros, such as the trend of 10-year US bond yield, the rate-cutting cycle in the US, size of the stimulus package from China and the performance of crude prices on the back of rising geopolitical tensions.

What is your year-end target for Nifty?

It should remain within the trading range of 23,000 and 27,000.

One piece of advice for new investors.

Invest with a view of more than two years. Also, follow the strategy of investing gradually on dips. If they follow the route of SIP then it could be a much better option.

Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.