The Sensex and Nifty may see bigger correction on the back of disappointing earnings in the third quarter, warns Nischal Maheshwari, head of research at the Edelweiss Financial Services.
The Sensex jumped 6 per cent in January and ventured into the uncharted territories to hit all-time high of 29,844. However in the last seven trading sessions the Sensex has plunged from the high levels. It has fallen over 1500 points or 4.5 per cent.
In an interview to NDTV, he said, big investors are beginning to question the valuations of Indian markets. "The current quarter has witnessed topline growth of only 2 per cent. Margins would have gone up because of raw material cost going down but the topline is not growing at all as there is no demand in the economy and it does not seem to be reviving very soon. That is a cause of concern," Mr Maheshwari said.
The BSE Sensex and Nifty, which opened 1 per cent lower, saw further selloff on Monday as exit polls for Delhi election indicated a victory for Arvind Kejriwal's Aam Aadmi Party. Votes will be counted on Tuesday.
"Delhi was a high-decibel but any setback to the BJP will not be a big concern as it is a small state. It won't force the central government to be populist in its approach," he said.
The forthcoming Budget will be key for the markets, Mr Maheshwari said. "A lot depends on budget. Given that we have very high hopes from the budget and historically whenever we had high hopes from the Budget it always disappointed and disappointment will definitely come in there is a fair chance that the markets going much lower from here," he said.
He also said future upmove of the market needs support from the earnings. "Going ahead the markets will see an up move only after the demand picks up and the government should start investments. Demand has to pick and it has to reflect in IIP numbers, commercial vehicle sales, EPC order books and cement sales numbers," he said.
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