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NEW DELHI: A further 3-5 per cent further fall in valuation can make risk-reward favourable for Nifty50, Credit Suisse Wealth Management said in a note, adding that the index stocks are trading at or below the 5- to 7-year average PE valuation, barring stocks from energy, select discretionary, and IT sectors.

At present, Nifty50 trades at a 12-month forward PE ratio of 17.5 times, in line with the pre-Covid three-year average, and marginally above the pre-Covid five-year average of 16.9 times, the brokerage said.

Nifty50 has fallen 9.7 per cent in the last four weeks against a 9.5 per cent drop in the MSCI AC World index and a 9.3 per cent fall in the MSCI Asia ex-Japan index during the same period.

Credit Suisse Wealth Management said: “a further 3-5 per cent correction in valuations for Nifty50 will potentially make risk-reward favorable for India as the fundamentals such as corporate leverage and return on equities (ROEs) are much better than pre-Covid levels.

The wealth manager said global equities have been under pressure, as bond yields and equity risk premium climb. As a result, the valuations have de-rated materially for global markets including India, it said.

“Given the challenging macro backdrop, we expect the Indian equity market to remain volatile, but it could offer selective buying opportunities on corrections. We advise investors to focus on diversification and risk management. We prefer to remain selective and focus on companies with robust cash flows, lower debts, and strong balance sheets,” the wealth management firm said.

Credit Suisse Wealth Management said sector rotation could favor the consumption sector from a medium-term perspective. It remains positive on sectors benefiting from reopening trade like multiplexes and staffing companies.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)


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