13 May , 2024 By : Debdeep Gupta
Benchmark indices Sensex and Nifty 50 fell nearly 1 percent on May 13 tracking negative cues from global markets after a report revealed a decline in US consumer sentiment to a six-month low driving up short-term inflation expectations.
Amid pre-election jitters, investors are expected to proceed cautiously, particularly with the surge in the India VIX adding to the uncertainty. India VIX rose nearly 14 percent to 21 in early trade today. Analysts have noted that market uncertainty stemming from the general elections' outcome will persist until the results are announced.
Although large caps appear reasonably valued, the Indian markets are deemed overvalued. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said that the Nifty is currently trading at more than 19 times its estimated FY25 earnings, above its long-term average. He attributed this partly to the higher earnings and GDP growth potential of the Indian economy, a trend unlikely to be matched by any other economy in the coming years.
"The overvaluation partly reflects the higher earnings and GDP growth potential of the Indian economy. No other economy can do that for the next several years," Vijayakumar said.
At 9:45 am, the Sensex was down 661 points or 0.9 percent at 72,003 and the Nifty 50 was down 183 points or 0.8 percent at 21,871. About 933 shares advanced, 2,189 shares declined, and 124 shares remained unchanged.
Nifty 50's trading range was seen at 21700-22500 by Prasanth Tapse, Senior VP (Research), Mehta Equities. Nifty 50 is likely to find support at 21,800 and face resistance at 22,500, Tapse said in a note.
US indices faced difficulty gaining traction on May 10 as consumer sentiment data hinted at an economic slowdown amidst persistent inflation. Subsequently, the 10-year US Treasury Yield climbed from 4.45 percent to 4.50 percent. Asian indices opened lower on May 13 due to indications of slack in China and news of US President Joe Biden's intentions to increase tariffs on certain goods from the world's second-largest economy.
Investors are currently awaiting the release of US CPI data on May 15 to gain further insights into the trajectory of interest rates.
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