Good arguments, but here are are our thoughts
Well your argument is valid if we limit ourselves to last 2-3 years. But let’s go back to last 20-25 years and see what was average PE mutiple.Covid was a black swan event and is only one data -point. To take a better prespective ,we need more data points as well as need to include the falls that were secular in nature i.e. due to macro factors .
Last 15 years bull run across the globe were due to Fed funding as well as Central Bank across the globe were printing money and funding was at very low or negligible cost.
If we go back to normal days of interest rates i.e. before 2008 , with a normal liquidity in the markets, the PE levels were very different . So may be liquidity driven PEs need to readjusted.
(Additional conundrum- Now add Adani to Nifty and see what happens to PE argument )
Well , Indian IT companies are service providers to US & European companies. If they go into recession, the business of these companies gets affected.
Also there’s another well proven fact that in a bear market, weak become weaker. So we feel that IT index would copy the downward trend of Nasdaq index.
Last point :Support and resistances are meant to be broken ,but they need time ,lot of efforts and lot of macro factors.
Have a look at S & P 500, Nasdaq – June low was considered to be a strong support as well as pre-Covid levels were supposed to be resistance -zones- all have been broken.
Let’s keep a track – these are interesting times.
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