The S&P BSE MidCap Index has risen more than 20% this year, surpassing a 7.4% gain in Indias equity benchmark. It is trading at 24 times on earnings-based valuation versus 19 times for the Sensex index, according to data compiled by Bloomberg.
In 2021, software stocks were doing very well, the narrative was that the global wave of digitisation and moving to the cloud will ensure that the deal pipe for the Indian software sector will remain robust for many years. Today in 2023, the narrative is that valuations are expensive and the deal pipeline has slowed. So, does there lie an opportunity to take a contrarian bet?
"Last week, markets continued to witness selling pressure, with the indices closing in the red for the 3rd consecutive week. Weak global cues amidst inflationary concerns, with profit booking at higher levels, continue to weigh upon the investor sentiment. Most of the leading Nifty heavyweights, with the exception of Reliance Industries, ended in the red."
In the previous downgrade in 2011, the market saw a much more meaningful correction. The current correction is a mix of cautiousness and profit booking.
When you are in your nervous 90s, expect bouncers and choose your shots carefully. The domestic equity markets have had a dream run over the past few months, buoyed by healthy corporate earnings growth, reasonable valuations, resilient domestic macros, positive global investor sentiment, and the influx of FII and DII money.