Nifty at record high but global brokerage firm remains cautious

 

Nifty at record high but why global brokerage firm remains cautious? 

Posted by: NILESH WAGHELA 

MumbaI: Despite Nifty crossing the 19,000 mark for the first time with $10 billion in foreign institutional investor inflows, global brokerage firm CLSA remains cautious on Indian equities.

Nifty on Wednesday zoomed past its December 1 record high level in style to cross the 19,000 mark for the first time. Global brokerage firm CLSA, which had taken a 40% underweight stance on Indian equities in November 2022, said there are five reasons why it isn't changing its mood.

"We remain cautious for now, given exceedingly rich valuations, margin erosion depleting India’s relative profitability, consensus EPS growth expectations remaining too  optimistic (certainly versus the delivered track record), the RBI likely lagging EM central banks in the timing and scale of policy easing, and our econometric model signalling the market is 14% overbought," CLSA said in a report.

According to CLSA, the reasons for their cautious stance include rich valuations, margin erosion, overly optimistic earnings growth expectations, the Reserve Bank of India lagging behind other emerging market central banks in policy easing, and overbought conditions in the market. CLSA believes that other emerging markets such as Brazil, Mexico, and Indonesia are better positioned for policy easing.