Nifty valuation falls below 3-year average: Is it buying opportunity?
What's the story
The Nifty 50, a benchmark index representing India's top 50 companies by market capitalization, has witnessed its valuation slip below the three-year average.
This decline is mainly due to a recent sell-off spearheaded by foreign portfolio investors.
It raises concerns among investors about the overall health of the market and the potential for further corrections.
However, midcap and smallcap indices still trade above their respective three-year average price-to-earnings ratios.
Expert prediction
Market expert predicts further downside for Nifty
Speaking to CNBC-TV18, DSP Mutual Fund's Head of Equities Vinit Sambre shared his thoughts on the current market scenario.
He said, "We are at 19 times earnings on the Nifty, and we have corrected 12-13% from the top. If we assume 18 times earnings as the base, there could be another 5-6% downside left on the Nifty."
This prediction hints at further declines in India's top stock index.
Market shift
India's equity market: From most expensive to tempered valuations
In the latter half of last year, India was dubbed the world's most expensive equity market. But a downward trend has since tempered those lofty valuations.
The Nifty 50 and Nifty Midcap 50 peaked in late September. However, in mid-November, smallcap stocks started facing the heat with investors losing ₹4 lakh crore as the index fell by 20% over two months.
Investment outlook
Market risks and investment opportunities amid downturn
Gurmeet Chadha, Managing Partner and Chief Investment Officer at Complete Circle, spoke about the current market risks.
He said, "Most of the risks are now on the table, so whether it is Trump tariffs or some slowdown in earnings."
Despite these challenges, Chadha sees potential investment opportunities in banks, chemicals, and defense stocks.
This perspective offers a glimmer of hope for investors amid the market downturn.