Domestic markets get 2018 nostalgia in pre-election year, says Kotak Equities
BJP) led NDA government returned back to power. Current market valuations, domestic macroeconomic conditions, global economic outlook and similarity in political situation in 2023 draw a degree of parallels with the situation that existed in August of 2018, noted Kotak Institutional Equities in a report.
«We see a fair degree of parallel between the economic and market conditions now and five years back (August 2018).
There is a great deal of similarity even in the domestic political situation, with the market being quite confident about the return of the BJP-led NDA coalition in the May 2024 elections, as it was about the May 2019 elections,» the Kotak report said.
While the 50-stock Nifty-50 index has delivered a 67% return in INR terms and 42% in USD terms in the past five years, market returns are expected to remain muted over the next few years, irrespective of the level of economic growth, the brokerage said.
It is of the view that even in a scenario of strong economic growth, multiples may de-rate in several large sectors, given the sector-specific challenges which include disruption of business models of incumbents resulting in likely lower profitability and multiples over time. The report mentioned that the current high multiples of the market and ‘growth’ sectors are supported by the all-powerful narrative of strong economic growth in the medium term.
