Citigroup Global Markets cut its Nifty target for March 2021 from 11,400 to 10,100 as the three-week lockdown in India amid the coronavirus scare threatens to hit the economy sharply.
In a note titled 'Lockdown Blues' on Thursday, Citigroup said that the earnings estimates for the financial year ending March 2021 will see sharp downgrades over the coming weeks.
It said earnings will be 'flattish', assuming gross domestic product (GDP) growth over the next 12 months slows down to 2.5 percent. The brokerage said there should be a recovery in the financial year ending March 2022, off a low base.
India's three-week lockdown became effective on Wednesday to stop the spread of coronavirus. Cases in India have multiplied to nearly 700 and the epicentre of the virus has started shifting from China to the US and Europe.
Indices of all major stock markets have tanked, including India. Nifty 50 ended higher by 3.9 percent at 8,641.45 on Thursday, extending gains for the third straight session but it is down 30 percent from its record high of 12,430.50 in January.
Stock markets have hit a circuit twice in March and recorded their biggest ever one-day decline on Monday as uncertainty loomed over the implications of the virus spread globally. Several analysts have predicted a recession in 2020.
Citi believes that the Nifty may bottom at 7,600, which is another 9 percent decline from current levels, and the underperformance in financials is a bit overdone given where valuations are after the correction.
The timing of global and India recovery from the coronavirus issue is impossible to call - any further delays there could have further economic/earnings impact, said Citigroup.