New Delhi [India], March 14 : Despite low volatility in the domestic stock markets over the past few months, investors are expected to tread cautiously going ahead, in the backdrop of the recent meltdown in the Indian equity market, according to the latest Nuvama report.
"Nifty has declined by 15 per cent over the past five months, marking the longest correction streak since September and the worst post-COVID. Despite this, low volatility suggests that peak panic may still be ahead," the report said.
The report by Nuvama highlighted that India's valuation premium to other emerging markets has dropped significantly to 50 per cent, down from 70 per cent, bringing it back in line with historical averages.
Additionally, the report said that global risks have intensified due to slowing US growth, with Q1 2025 GDP now cast at 0.5 per cent, down from 3.8 per cent.
It said that there are concerns that the Make America Great Again (MAGA) tariffs and Department of Government Efficiency (DOGE) spending cuts could fuel inflation or even trigger a recession in the United States.
A weakening job market further adds to risk-off sentiment, potentially leading to emerging market currency weakness, including the Rupee, as per the Nuvama report.
The report further added that market bottoming remains uncertain as earnings revival appears distant due to weak demand and fading margin tailwinds.
Policy easing is also limited, with bond yields still elevated, restricting monetary flexibility, the report added in its analysis of the condition of the market.
A bottoming indicates that the market has reached its low point and could be in the early stages of an upward trend.
Stock markets, especially Indian equity benchmarks, have shown mixed sentiments with investors reacting to global and domestic economic cues. On March 13, the stock markets ended on a negative note with Nifty standing at 22,397.20, declining 73.30 points or 0.33 per cent.
According to market analysts, investors will keep a careful eye on both domestic and international economic developments as time goes on in order to determine the direction of the market.
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