Mumbai: Stating that the economy is losing momentum, brokerage firm Ambit Capital on Thursday said the benchmark Sensex is yet to bottom out and can fall to 22,000 level in the "foreseeable future".
Weak corporate earnings as well as low investments by foreign investors into India-focused funds could bring down the Sensex in the near term, its Chief Executive for Institutional Equities Saurabh Mukherjea said.
"There is a high probability that we will see the Sensex at 22,000 level in the foreseeable future," he said.
The Sensex, which began the year at 26,160.90 level, has shed nearly 1,400 points or over 5 percent following renewed worries over the health of Chinese economy, which forced both the World Bank and IMF to lower their global growth outlooks.
The market has fallen even below the levels when Prime Minister Narendra Modi was sworn in on May 26, 2014 and closed 2015 with a 5 percent loss, a first in the past four years.
On the economy, the brokerage said, "GDP growth is likely to remain under pressure in the immediate term and we expect GDP growth to be at 6.8 percent for the current fiscal."
In an unusual observation, the brokerage said the government's aggressive black money drive is impacting GDP growth in the short term.
"Prime Minister Narendra Modi's crackdown on the black economy and an overhaul of the subsidy mechanism are likely two key developments adversely impacting GDP growth in the short term," the brokerage said.
It added that the economy has been consistently losing momentum for the past many quarters.
"Our analysis suggests that production of coal and cement, two-wheeler sales, rural wages, electricity generation, non-oil bank credit and bank deposits are in fact losing steam," Mukherjea said.
He added that low railway cargo volumes, stagnant electricity consumption and poor credit offtake are also reflective of the deeper slowdown.