The continued decline in the stock market has surprised the investors. The continuing decline from the end of September last year is not taking the name of stopping. This decline has shocked investors who had never seen such a decline before. They do not understand what they should do in this market. However, history is a witness to the fact that when there is disappointment all around, the investment made gives great returns. The question is whether investors should shop amidst this decline or stay away from the market till the decline continues?
It is difficult to tell how long the market will continue. President Donald Trump’s tariff policy in the US and the increasing interest of investors in investing in US dollars has made the stock market condition thin. Here, the weak earnings growth of companies in India has also increased the concern of investors. The earnings of companies were weak even in the third quarter. Earnings growth of Nifty companies in the first 9 months of this financial year is just 4 per cent on a year -on -year basis.
NBFC, Healthcare and Capital Goods have performed well. The performance of IT companies has seen stability. But cyclical sectors like metal and oil and gas have been poor. Businesses associated with cement, chemical and consumer have also disappointed. Rural demand does not show good recovery. The government has given relief in income tax in the union budget. RBI has reduced interest rate after five years. Right now both these steps do not see a positive effect.
It is difficult to say whether the valuation of the Indian market is still attractive. However, it is true that the valuation has declined due to the ongoing decline for the last 5 months. Currently, the valuation of the Nifty is 19.1 times the one -year forward earnings. This is less than the long -term average 20.5 times the valuation. Looking at the difference between the bond yield and the earnings yield shows that this difference is decreasing. When the market declines, this difference decreases, while this difference increases when the market is on peak.
This median gap for the Nifty Index in the last 18 years is 1.3 percent. This means that the Nifty and 4.5 percent decline from here. If the Nifty falls from the level of 22,800 and 4 percent, it will come to 21,900. If in the last 18 years, the gap between the bond and the earnings yield is seen, then its mid point comes 1.8 percent. This means the Nifty’s level of 24,000. This can be called a very poor target of the Nifty for 2025. The question is, should you invest in the midst of this target? Experts say that you should gradually invest in largecap stocks without paying attention to the noise of the market.