Nifty may break by 5-15% due to RBI’s policy change, may also affect retail inflows: Divyam Sharma

Divyam Sharma, Founder, Green Portfolio said that a fall of 5-15 per cent in Nifty cannot be ruled out. Given the developments, investors should not take leverage, he added. Sharma, who has more than 15 years of experience in investment management, said the RBI’s easing of its policy stance will see a fall in the market and may impact inflows from retail investors into the market.

Inflation, hike in interest rates will have an impact on valuations

In an interview to Moneycontrol, he said that the main positive for the market is liquidity and this could affect the pace of growth in 2022. In emerging markets including India, there is a lack of liquidity from foreign institutional investors. Investors should now look at the impact of inflation and rise in interest rates on valuations and enterprises while investing in equities.

Proposed Bill on Cryptocurrencies Is Not the End of the Road, But Just a Beginning

There may be pressure on the market in the short term

“With plans to raise interest rates, we expect the hike in P/E (price-to-earnings) to stop now,” said the founder of Green Portfolio. He said, fear of Omicron, rising inflation, strengthening of dollar, hike in interest rates may add to the short-term pressure on the markets. However, it will be interesting to see how companies will be able to show growth in numbers without much impact on margins.

CPI retail inflation expected to be above 5%

On inflation, Sharma said, CPI retail inflation is expected to be above 5 per cent in November. He said Brent crude prices were at their highest level in November. In the US, the CPI figure is projected to reach a 4-decade high. Due to this level of inflation, interest rates may increase more than expected and this may lead to a fall of 5-15 per cent in equities.