Nomura sees further 5-10% fall in stock market
The firm has rolled forward earnings estimates and reset its Nifty target to 11270 for September 2019, from 11892 for June 2019.
The valuations have corrected to 16.1 times one-year forward from 18.8 times at the peak in August.
"The spread between the earnings yield and bond yield is still lower than the long-term average, indicating still some degree of overvaluation," said Nomura.
Rising trade deficit, driven primarily by rising oil price and a slowdown in credit flow through NBFCs have emerged as risks to economic growth in the near term, said Nomura.
Slower domestic growth will have an adverse impact on near-term earnings, it said. Nomura said that government interventions forcing oil companies to bear the burden of higher oil prices also hits aggregate earnings growth.