Economic Fundamentals Don't Warrant Continuation of Stock Market Rally beyond Current Levels: Analysts

Economic fundamentals do not warrant continuation of the stock market rally much beyond the current levels, analysts have said.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the 15 per cent surge in Nifty from the low levels of March has given a bullish flavour to this rally; but it is difficult to describe this as a bull market since valuations do not permit a sustained rally and the evolving economic fundamentals do not warrant continuation of the rally much beyond the current levels.

A sustained bull run needs low valuations and steadily improving growth and earnings prospects. Valuations are not favourable now and growth and earnings prospects, though good, are not very bright, he said.

For instance, the June auto sales numbers came below expectations and indicate that sluggish demand remains a problem, particularly for price sensitive mass consumption products. The economic recovery continues to be ‘K’ shaped as indicated by the resilient demand for premium products, he added.

There is valuation comfort in financials, particularly the leading private sector banks. Leading PSU banks are attractively valued compared to their private sector peers. FY24 Q1 results of the banking majors will be good, he said.

Vinod Nair, Head of Research at Geojit Financial Services, said the market is maintaining its optimism; however, a profit-booking tendency is visible at the upper band as the recent rally has raised the market to the historic new high range.

The momentum of the market has shifted from the frontlines of this year to the laggards like IT, commodities, and PSUBs.

The market is taking a breather ahead of the upcoming Q1 results.