Earnings slowdown and consumer stress raise correction concerns: Manish Sonthalia

economictimes.indiatimes.com:

«The broader markets on its part is way too expensive than historical numbers. One-and-a-half times deviation from the mean when you come to valuations on the small and midcap index whether it is 2007 levels or 2017, 18, 19 when you saw massive rally in the broader market. So, there is room for cautiousness to be exercised, not that I am very bearish on the market but I think some caution is warranted,» says Manish Sonthalia, Emkay Investment Managers.


This market has made a very decent comeback. IT index at an all-time high. Bank Nifty marching towards an all-time high. Has that sharp correction or the sharp correction which hit us in October, November, do you think that is over?
Manish Sonthalia: So, I am not in the camp who believe that the worst has been over, not that the markets will fall, but the markets can fall and this is based on whatever we are seeing at the ground level. Earnings slowdown, consumer leverage actually blowing off.

The government not spending enough that is leading to a massive slowdown. You saw the GDP numbers. FY25 GDP estimates have been revised down. So, where are we currently? I think instead of the markets believing a 15-17% of an earnings growth in FY26 and 27, I would go with rather a 10% to 12% sort of an earnings growth and give it a multiple of around 18 times as opposed to Nifty 50 actually trading at 20 plus PE in the past four years, run up to the pandemic, after the pandemic the next four years. So, based on that a 10% correction even from here is possible, not that I am