4 weeks ago
India’s stock market correction is part of a natural rebalancing and is likely to bottom out before a rebound, according to Ed Yardeni, President of Yardeni Research.
"Global investors decided that they had too much in the Indian market. The valuation multiples got stretched, and they saw an opportunity to rebalance their portfolios, more into China, more into Europe," Yardeni explained.
However, the fundamentals for India still look pretty good. The stocks are cheaper now, and while the market is going to find a bottom, there may be some consolidation for a while before the climb towards the previous record high resumes.
“It is the same story for India and the United States stock markets - a great performance, some need for profit-taking consolidation, and then global investors will diversify back into India and the US,” he added.
Yardeni also weighed in on US stock market volatility, which has seen fluctuations after hitting a record high on February 19. He expects choppy trading to continue until mid-March, when fiscal deficit and budget negotiations wrap up. Despite short-term uncertainties, he remains bullish on long-term growth, maintaining his year-end target of 7,000 for the S&P 500.
On the US economy, Yardeni dismissed concerns of a slowdown despite weaker retail sales and consumer spending in recent months. He attributed the dip in first-quarter GDP estimates to temporary factors, including severe winter weather in January—the coldest since 1988. “I expect a rebound in retail sales and employment soon,” he said, adding that fears of a soft landing or recession will likely fade, just as they did in mid-2023.
Yardeni also commented on NATO’s shifting dynamics, as the US commitment to European defence faces scrutiny. He noted that European nations may be forced to bolster their own security policies, a trend that has already driven European defence stocks higher. This shift, he added, could allow the US to slightly reduce its defence spending in the future.
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(Edited by : Shweta Mungre)
