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Business Standard
27-05-2025
- Business
- Business Standard
Nifty retreats after hitting 25k wall; Sensex ends 625 points lower
Benchmark indices declined on Tuesday, reversing all the gains made in the previous session, as investors assessed the impact of the global trade climate on the world economy. Profit-taking in heavyweight financial and information technology stocks weighed on market performance. The Nifty 50 ended 0.7 per cent, or 175 points, lower at 24,826, while the Sensex fell 0.76 per cent, or 625 points, to close at 81,551.63. The 50-stock index had risen about 1.6 per cent in the previous two sessions, driven by foreign inflows, easing tensions between the US and the European Union, and the Reserve Bank of India's (RBI's) support for the government. 'We are likely seeing some profit-taking and liquidity divergence towards the primary market, as well as a couple of large promoter stake sales,' said Sunny Agrawal, head of fundamental equity research at SBICAP Securities. Foreign portfolio investors (FPIs) were net buyers to the tune of ₹340 crore, while domestic institutions were net buyers worth ₹10,015 crore. Although May has been the best month in terms of FPI flows, flows to other emerging markets (EMs) have been stronger. Some market experts have raised questions about the sustainability of these flows in the future, as Indian equity valuations have returned to elevated levels. 'There are better opportunities to invest within Asia, where valuations are cheap and fundamentals are sound. If the fundamentals turn, there is no reason why FPI money should not return,' said Sunil Thirumalai, head of EM and India equity strategy at UBS. UBS recently upgraded its stance on the Indian markets to 'neutral' and has set a year-end Nifty target of 26,000. 'We upgraded India because it has a very defensive and domestic profile, which is important in this market. However, valuations are still pretty expensive, which makes it hard for us to make it overweight now,' Thirumalai said. This is the third time that the Nifty has retreated after hitting 25,000 this month. To drive the Nifty past the 25,000 resistance level, investors will look to India's January–March quarter gross domestic product data, due this week, and the RBI's rate decision next week, according to analysts. 'The benchmark index once again failed to decisively breach the 25,000 resistance level, reflecting the absence of positive triggers. Largecap stocks underperformed, weighed down by subdued foreign institutional investor participation and lacklustre earnings from blue-chip companies. Conversely, mid and smallcap segments remained relatively resilient, supported by better-than-estimated fourth-quarter earnings and moderation in premium valuation,' said Vinod Nair, head of research at Geojit Financial Services. The market breadth was mixed, with 2,053 stocks declining and 1,897 advancing. Four-fifths of Sensex stocks declined. HDFC Bank, which fell 0.7 per cent, and ICICI Bank, which dropped 0.9 per cent, were the biggest drags on the Sensex. 'We are currently witnessing a tug-of-war between bulls and bears amid mixed global cues. However, favourable domestic factors, such as a good monsoon and strong macroeconomic data, are helping to maintain a positive undertone. We continue to maintain a positive outlook on the market. However, sustained strength in the banking and financial sectors is crucial for the Nifty to overcome the 25,200 hurdle and regain upward momentum,' said Ajit Mishra, senior vice-president of research at Religare Broking.
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Business Standard
27-05-2025
- Business
- Business Standard
UBS says India's 60% valuation premium to EM peers not justified
Indian equities command a 60 per cent premium to emerging market peers, which is not justified given the "ordinary" earnings growth, said Sunil Thirumalai, head of emerging market and India equity strategy at UBS, during a media briefing on Tuesday. "Historically, India has commanded a 25 per cent premium to other emerging markets. It peaked at about 90 per cent in September last year and is now down to 60 per cent. This is still a significantly higher premium compared to history," said Thirumalai. He added that the earnings and other fundamentals of Indian firms do not justify such premium expansion. "One of the biggest reasons behind this premium expansion is domestic flows. The retail flows in India have been so strong that they have supported markets despite the ordinary numbers reported by companies," said Thirumalai. He said the revival in foreign portfolio investor (FPI) flows will depend on India's fundamentals. UBS recently upgraded its stance on the Indian markets to "neutral" and has set a year-end Nifty target of 26,000. "We upgraded India because it is a very defensive and domestic profile, which is important in this market. But valuations are still pretty expensive. That's why it's hard for us to make it overweight now," Thirumalai said. He added that China remains one of UBS's most preferred markets. "The companies have been giving you decent earnings growth, even in the last three months, all through intense tariff news flow. China has seen some earnings upgrades, whereas most of EM has seen downgrades, and valuations are still cheap," Thirumalai said. Apart from China, UBS prefers Indonesia, Thailand, Malaysia and the Philippines in the ASEAN region.
