A day after US investment bank Goldman Sachs called time on ‘India’s world-beating market rally’, key indices Sensex and Nifty tripped. The Sensex fell 505 points or 1.33 per cent to close at 37,585. The broader Nifty was down 137 points or 1.19 per cent at 11,377.

In a report dated September 16, Goldman Sachs analysts cut India’s rating to ‘equivalent of hold rating from buy’ on the back of ‘rising multiple macro headwinds in the near term and election event risk’.

“The risk-reward for Indian equities is less favourable,” the analysts, including Sunil Koul, wrote in the report. “The key reasons for our less-optimistic view include, among others, stretched valuations, multiple macro headwinds in the near term and election event risk.”

According to Goldman, India’s “world-beating economic expansion”, which now faces tests from higher oil prices and a tumbling rupee, underwrote the stellar run for equities, confounding non-believers in recent years. The lack of breadth among rising stocks and uncertainty going into key elections next year are now becoming common refrains for those positioning for less rosy future returns. Valuations have also gotten stretched and history points to negative absolute and relative returns when multiples get so far above average, the Goldman Sachs report said.

Top Sensex losers on Monday included Sun Pharma (down 2.85 per cent), HDFC (2.47 per cent) and Tata Motors (2.35 per cent).

Trade war fear yet again dominated the news after reports suggest that US President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, according to a senior administration official quoted by Reuters. The rupee extended its losses to 72.64 per dollar, down 79 paise, after it opened lower by 67 paise at 72.52 per dollar versus Friday's close 71.85.

 

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