The Sensex has lost almost 1400 points in the last 5 trading sessions. In the last few days analysts have been busy re-visiting their Sensex and Nifty targets as investors are now bracing themselves for modest returns from stocks.
Most domestic houses have also warned that returns are likely to be modest. The Narendra Modi government would soon complete one year and the over exuberance over the new government seems to be now fading.
Corporates have realised that the new government does not have a magic wand to push growth. Here are a few reasons why markets and analysts have lowered their expectations.
1) Corporate Results Likely To Disappoint
The results season has begun very poorly. IT majors TCS, HCL Tech and Wipro have delivered results that lagged estimates. The remaining part of the earnings season is at best likely to remain poor. While everybody new this was going to be a bad quarter, the feeling is that the next few quarters may see financial performance that is muted. This could have an impact on the markets.
2) MAT Issue A Big Drag For FIIs
The Minimum Alternate Tax (MAT) issue is likely to remain a big drag for the markets. The Finance Ministry has reiterated that FIIs have to pay the MAT for the previous years. This is a staggering sum of Rs 40,000 crores and if they resort to selling to pay-off the amount it would have a bad impact on the markets.
Read more on MAT here
3) Greece Another Issue
A default by Greece on its debt obligations could have an impact on the Indian markets. So far global markets are just ignoring this major risk as the issue keeps dragging on. It would be interesting to see what happens with regards to Greece. "As one noted global investor pointed out: "Let's face it, Greece is bankrupt".
4) Major Bills Stonewalled
If parliament does not pass crucial Bills like the Land Acquisition Bill, GST and the Real Estate Bill in the budget session, it could compound worries for the market. While the government has shown great determination in passing the Land Acquisition Bill, many analysts believe it would be stonewalled in the Rajya Sabha.
This is certainly not good news for the markets. Overall, it's a sell on rally markets. Buy if you have the patience to hold onto stocks for at least a year.