In the Indian stock markets the recent corrections provide a much-needed pause after an extended period of rapid growth, said Gautam Duggad of Motilal Oswal Financial Services Ltd.
"There is a lot of noise about earnings being weak and all is lost...There is a moderation compared to what we have seen earlier. FY25 had begun on a muted note in the first quarter, and now the second quarter... but there is a disproportionate drag which has come in from commodities. If you remove commodities, then coverage goes from 0-11% to 12%. So, if you were to compare 1H vs 2H on an ex-commodities basis, there is not much change," Duggad explained.
While there has been a noticeable slowdown, it is not as dire as some suggest, according to him. "I am not trying to deny that there has been no moderation, there has definitely been moderation. All said and done, this will be the first year for single-digit earnings growth after five years...we had every year a strong double-digit performance, but the disproportionate drag came in from commodities."
Addressing the broader market outlook, Duggad emphasised the recent market correction is part of a healthy market cycle. "October was the first month where you saw a 5% correction. The last time you saw that kind of correction was in March 2020, during Covid-19. So the market has had a breathless, relentless rise, more so in the broader market than in the large-cap space."
There has been no breather in the last couple of years, so from that point of view, it’s good. The correction is allowing people to think, figure out ideas, see where earnings are strong, and where valuations have corrected, he said.
"Otherwise, what was happening was that the market was very, very forgiving for earnings misses. You saw the June quarter, and the October quarter was very democratic," he noted.
Duggad’s comments come at a time when markets have been adjusting to external factors, particularly the pressure from commodity price fluctuations. But he sees this as a necessary recalibration for the market to regain balance.
Gautam Duggad On Market Correction | Watch
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