versold market presents long-term investment opportunities amid political and earnings shifts

The Indian equity market has recently experienced a significant correction, with the Nifty 50 index witnessing an 11% decline from its all-time high of 26,216 reached on September 26, 2024. This downturn, which has affected various market caps, styles, and sectors, has been attributed to a combination of factors such as foreign institutional investor (FII) selling, disappointing Q2FY25 earnings, rising US 10-year bond yields, delayed recovery expectations from China, and a strengthening dollar index.

Long-term Investment Opportunity

Axis Securities has identified a potential long-term investment opportunity in this challenging environment, suggesting that the market has entered an oversold zone. With over 60% of NSE 500 stocks correcting more than 20% from their 52-week highs and only 38% trading above their 200-day moving average, valuations are now perceived as reasonable. This presents a favorable moment for investors to consider building a long-term portfolio.

Political Stability and Investor Confidence

The recent political landscape in Maharashtra, with the BJP-led Mahayuti alliance securing a decisive victory, is expected to enhance investor confidence in policy continuity. This political stability is significant for market participants as it ensures a more predictable environment for investment over the next five years. Axis Securities anticipates that this political development will act as a major sentiment booster for the market.

Earnings Projections

Despite the recent headwinds, Axis Securities remains optimistic about the earnings projections for FY25, projecting a modest decline of 1.5% and a growth of 7.6% for FY26. The brokerage firm emphasizes the importance of adopting a disciplined investment strategy during periods of market volatility and encourages investors to focus on quality stocks that demonstrate resilience and growth potential amidst the prevailing uncertainties.

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