Stock market may see 8-10% more downside, says Ambit Cap’s Dheeraj Agarwal

There is a likelihood of another 8-10 percent correction in the domestic stock market from the current levels, Dheeraj Agarwal, co-head of institutional equities at Ambit Capital, tells CNBC-TV18 in an interview.

Domestic benchmark indices have fallen more than 8 percent from their record highs hit in October 2021 driven by fears of aggressive interest rate hikes in the US, soaring global crude oil prices, high inflation, and geopolitical tensions in Eastern Europe.

“To me, it’s (8-10 percent market fall) is not catastrophic but, given the current market condition, it will be considered a meaningful correction,” Agarwal says.

He, however, shrugs off concerns that market participates are on a selling spree to raise cash to subscribe to the impending public issue of Life Insurance Corporation of India next month.

“Don’t think by itself would result in a market fall,” Agarwal shares with CNBC-TV18.

Agarwal sounds cautious on the market’s optimism for revival in capital expenditure in the country. The equity strategist said that 60 percent of the overall government capital expenditure comes from states, whose finances are on a sticky wicket.

Investors have been bullish on the capex revival story, given the government’s push for higher spending on capital formation in successive Budgets and the healthy balance sheet of both corporates and lenders.

The Reserve Bank of India’s Monetary Policy Committee too has expressed optimism for revival in capital expenditure in the country, while veterans like Chris Wood of Jefferies India have pointed to the recovery in the real estate market as sign of an impending boom in capex.

“Many are comparing forthcoming capex boom to that of 2003-07, which I think will disappoint,” Agarwal says.

The correction in information technology stocks, according to him, is not enough for investors to consider buying them given that they are only reverting towards their long-term valuations, which will not provide much room for upside.

Domestic IT stocks have fallen 5-20 percent from the start of the year due to a global correction in the space amid expectations of sharp rise in interest rates in the US.

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