Indian stocks won’t bottom until August or September and the benchmark 50-stock Nifty index will fall another 6% to 14,500 points by the end of this year, a US brokerage said on Wednesday. .
A reduction in corporate earnings as the benefit of a cheaper inventory buffer fades, continued headwinds in crude oil prices and “vulnerable” valuations for Nifty shares even after the recent correction have been cited by BofA Securities as the factors that will drive the markets down.
The brokerage originally estimated the Nifty would grow to 19,100 by the end of the year and revised the target to 17,000 after the sale.
The benchmark, which closed down 1.44% at 15,413.30 points on Wednesday, has lost ground in recent weeks, due to factors such as monetary policy tightening across world and rising commodity prices following the Russian invasion of Ukraine.
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“We are cautious on the markets despite the recent market correction. Besides tighter global monetary conditions and a slowing economic outlook, including fears of a U.S. recession, we see other risks,” analysts at the brokerage said.
Other factors are pushing the brokerage to be cautious, including revenue cuts of up to 4% with the risk of further downgrades and crude prices, which it says could hit $150 a barrel.
Meanwhile, the brokerage said the rupee will depreciate beyond its own expectations to Rs 81 against the US dollar by the end of 2022.
The rupee fell 21 paise to a record high of 78.35 against the greenback on Wednesday.
“We think the risks are still tilted towards further depreciation of the rupiah, as the fundamental outlook has deteriorated further, mainly due to the rise in oil and other commodities,” he said.
However, analysts were quick to add that the RBI’s reserves of almost $600 billion will be a risk mitigant.
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