Market overvalued, says Nomura

By agencies   |   Friday, 02 June 2006, 19:30 IST
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NEW DELHI: Indian stock market is overvalued and treading over speculative zone, which could be detrimental to investors, said Japanese equity research firm Nomura International in its latest report. "We feel investors are being betrayed by high earnings growth projections and macro risks are being ignored. "The report said many companies are entering the equity market to raise funds at very aggressive prices, which would reduce return on equity. This, it added, could be taken as an indicator of an equity market, which has reached its peak. The investment arm of the equity research firm Nomura had entered Indian stock market in mid-2005 when the sensex was around 8000, said a senior merchant banker. If the investment arm follows the advice of its equity research firm, it should become a net seller. However, it could not be confirmed whether the fund is selling during the current downturn in the equity market. The equity research fund has stressed upon the systemic reason for fall in stock prices. It said Indian equity market's liquidity problems are yet to be resolved, and "the investors are underestimating the extent to which stocks will be impacted by the unwinding of open futures contracts."