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Is the recent market correction likely to get prolonged after previous years’ record run?
We have seen a record run for the past four years, largely driven by record earnings growth. Nifty saw earnings growth of 22%, mid-cap, 36%, and small-cap, 46% This period led to mid caps and small caps doing much better than large caps. However, after the elections, we have seen a meaningful slowdown in earnings. Nifty mid-cap and small-cap earnings growth for April-September is now in the range of 0-5%. On the macro side, government capex was down 28% and state capex down 8%.
We expect the earnings growth to take time to revive, given the slow capex from the government, higher interest rates and high inflation impacting consumption demand. On the global side, we expect the USA spending cut of $2 trillion to have an impact on the global markets. Hence, both macro and micro are likely to see some headwinds as we enter 2025 and, hence, we expect the market to remain in the range of 21,500-24,500 for the Nifty, with the second half of 2025-26 being much better than the first half.
What are your expectations regarding the anticipated rate cutting cycle?
With inflation coming off in the USA, complemented by a slowdown, the US Fed has moved to cut interest rates by 100 bps from the peak. The Fed is likely to go slow on interest rate cuts as
