The sell-off in Indian equities on October 8, which dragged the Nifty to a 52-week low, may have improved valuations but has not yet resolved the market’s near-term risks. Market veterans see scope for the correction to deepen or prolong, even as they remain constructive on India’s longer-term earnings and domestic-flow backdrop.
Anu Jain, president at 360 ONE Wealth, flagged a significant technical breach: the market has slipped below its 200-week moving average, a long-term support level. That suggests the adjustment may still have further to run: either through lower prices or a prolonged period of consolidation. “It shows that there is still more pain; the technicals do point out that there is space for more pain,” Jain said.
Lakshmi Iyer, group president-investments and managing director and chief executive officer of Bajaj Alts, described the correction as an overdue cleansing of market excesses. Momentum indicators have weakened, she said, and investors should be prepared for further volatility before the market finds a firmer footing. “You will first get the poison, but you have to wait for the amrit,” Iyer said, likening the current phase to Samudra Manthan: a period of churning before value emerges.
The valuation picture is not uniformly attractive, yet. Iyer said valuations are moving into “incrementally bearable” territory and are now below long-term averages in some parts of the market. Jain said large-caps appear fairly valued, but mid- and small-caps still offer relatively limited comfort after years of strong rerating.
Iyer noted that mid-cap stocks are trading at a 55-60% premium to large-caps, with small-caps commanding comparable premiums. Yet, she argued that earnings resilience remains strong across many mid-sized companies, making this a market for selective investors rather than one for indiscriminate buying. “This is a market for stock-pickers,” Iyer said, pointing to opportunities among companies below the Rs 75,000-80,000 crore market-cap bracket.