Markets expected to consolidate due to elevated valuations

NEW DELHI: Geojit Financial Services Head of Research Vinod Nair has said a near-term consolidation in the market is expected due to elevated valuations, concerns over El Nino, and a slowdown in world GDP.

"The market surged to new highs, buoyed by positive indicators from both domestic and global fronts. Robust domestic industrial production and manufacturing PMI, coupled with the RBI's positive remarks on India's GDP forecast, contributed to the bullish trend," he said.

The ease in US bond yield and the expectation of multiple rate cuts by the FED in 2024 further fuelled market optimism. Investors expressed confidence that clouds over US economic growth would dissipate in H2CY24, anticipating a soft landing facilitated by normalisation in monetary policy, he added.

The IT sector rallied 7.6 per cent this week in expectation of a rise in demand from the US, optimism about AI-based opportunities, and hope that the Fed will cut interest rates in 2024, he said.

Joseph Thomas, Head of Research, Emkay Wealth Management said the equity market moved up across sectors and market caps in response to the Fed decision to hold rates. Almost all the markets including the US markets moved up on the prospects of the Fed deciding to keep rates on hold as also on account of likely rate cuts in the next year. Robust GDP growth numbers both in the US and in India also helped the sentiment to a significant extent.

While the impact may be short lived the probability of profit booking is very high as we approach the year-end. It is also likely that the talks of an impending slowdown could get more heard unlike as it was in the recent past. But equities are going to display superlative performance based on solid economic performance and gains in earning, he said.