'Night is darkest before the dawn': Sanjiv Bhasin sees sharp market rally ahead, new highs in June-July

Market guru Sanjiv Bhasin remains optimistic despite the ongoing market turmoil, predicting a sharp recovery in the near term and record highs by mid-year. On Monday, Bhasin urged investors to stay the course amid the current weak sentiment, pointing to an impending rally.

"Night is darkest before the dawn. Extremely weak sentiment over the last 5 months with markets seeing huge foreign selling in stocks. Get set for the best rally in the very short term, but new highs in late June/July on the cards. Keep the faith and up your exposure to stocks," Bhasin said in a post on X.

His comments come as Dalal Street witnessed another volatile session, with Sensex and Nifty falling sharply in early trade on Monday. The Sensex opened lower at 75,641.41 and dropped further to an intraday low of 75,294.76, losing over 600 points. The Nifty also declined nearly 200 points. At 9:58 AM, the S&P BSE Sensex was down 577.20 points, trading at 75,362.01, while the NSE Nifty50 stood at 22,752.95, down 176.30 points.

A key factor behind the market’s downturn is weak corporate earnings for Q3 of FY25. Several companies have posted single-digit earnings growth, which analysts say is insufficient to sustain high valuations.

Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out that Indian markets are underperforming compared to global indices. "The Indian stock market is underperforming this year, with Nifty delivering negative 3.4% returns, compared to 4.19% in S&P 500 and 11.7% in Europe. The broader market has seen a 9.6% drop in Midcaps and a 22% fall in Smallcaps. This is a clear reversion from overvalued levels," he said.

Vijayakumar attributed this underperformance to the "sharp slowdown in corporate earnings," adding, "Q3 results indicate only 7% earnings growth. A modest single-digit earnings growth does not justify high valuations. This is the main reason behind the relentless FII selling, which has impacted the market."

Another major concern weighing on the markets is continuous selling by Foreign Institutional Investors (FIIs).

Kranthi Bathini, Director of Equity Strategy at WealthMills Securities Pvt Ltd, said the Nifty dipping below 23,000 has increased investor concerns. "Foreign portfolio investors have remained net sellers, adding extra pressure on the market. As Nifty has fallen below 23,000, investors are hesitant to deploy fresh funds. Global uncertainties and Trump tariffs remain a major concern. Most investors are now in a wait-and-watch mode, rather than taking immediate positions," he said.

Despite some potential buying interest at lower levels, FII selling continues to dominate market trends. Domestic buying has provided some support, but heavy FII outflows remain a critical factor influencing market sentiment.