Sensex has further to fall, winter MSP hikes contained

We think that the recent fall in Indian equities – down by another 4% this week – has further to run. Domestically, concerns over the scale of balance sheet problems in the shadow banking sector will rumble on for a while yet. And even with the recent slump, valuations continue to look stretched. In addition, we forecast that the US economy will slow in 2019. We suspect that this will cause US equities to fall and that EM assets including Indian equities will get dragged down in their wake.