The record-setting spree of the Indian market has been derailed by a strong wave of selling as rising bond yields, geopolitical tensions, falling rupee and concerns over inflation due to higher commodity prices erode investors’ confidence in riskier equities.
The Sensex fell 3.5 percent and the Nifty was down 3.02 percent for the week ended February 26. Even though the market has reasons to worry, analysts see the correction as an opportunity to buy quality stocks on dips.
“Traders should not get intimidated because the larger degree uptrend is still very much intact. For a long time, the market had not seen any major correction, so this should only be construed as a much-awaited profit-booking or a short-term corrective phase, which is healthy in the longer run,” said Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking.
In the days to come, a lot will depend on how bond yields behave. Geopolitical tensions and inflation data will also be keenly watched by market participants, while developments around new US stimulus will also influence the mood.
As per Siddhartha Khemka, Head–Retail Research, Motilal Oswal Financial Services, the market may continue to consolidate, given the weak global cues.
“Investors would closely track bond yields, geopolitical tensions and inflation data for further market direction and would monitor developments around new US stimulus announcement,” he said.
Make the most of the fall
Most experts are of the view that the fresh correction is an opportunity to buy quality stocks for healthy returns as the long-term outlook of the market remains positive.
“We are not extremely bearish on the market, as the massive stimulus which is likely to continue in this calendar year and economic recovery put together should provide support to market at lower levels,” said Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities.
For India, most of the factors driving markets are in place except for valuations. Valuations will moderate over time, making India a good buy-on-the-dips market. “The Nifty50 range of 13,000 to 14,500 is an ideal range to accumulate stocks from 2 to 3 years perspective,” Oza said.
Areas of opportunities
There are pockets of opportunities in many sectors but analysts are particularly bullish on economy-centric pharma and the auto sector.
“Investors can move their money to pharma stocks amidst this correction as they have been consolidating for some time now and could see some pickup. Long-term investors can continue to remain invested while those in the need of liquidity can book profits from certain overvalued counters,” said Nirali Shah, Head- Equity Research, Samco Securities.
Investor confidence in the economy-driven sectors has further strengthened after the Budget and PLI scheme announcement.
“Few sectors and pockets that we can visualise can make money for investors given their past underperformance and potential recovery are banks, capital goods, construction, engineering, oil & gas, cement, real estate and metals. Hence, one can have an accumulation strategy in economy-driven sectors on every decline,” Oza said.
Ashutosh Tiwari, Head of Research at Equirus Securities, sees better growth in the manufacturing sector due to a pick-up in infrastructure, construction and Capex.
“We are more positive on companies from capital goods, industrial, infrastructure, metals, financials, auto and consumer discretionary sectors,” said Tiwari.
Naveen Kulkarni, Chief Investment Officer, Axis Securities, said that BFSI has turned out to be a significant opportunity after results and the Budget.
Building materials and infrastructure also are now seeing good traction. Earnings visibility is improving for the industrials sector. This will gain traction in the forthcoming quarters, he added.
Ajay Srivastava, CEO at Dimensions Corporate Finance Services told CNBC-TV18 that investors who want to bet on the economy stocks should start and continue with metal stories rather than going elsewhere in the cyclical story.
Another segment is home decor, he said. “I think that is where the big story is coming up. You got to be there whether it is your tile manufacturer, whether it is a paint manufacturer, anything related to real-estate inputs that are part of the course in this market,” Srivastava said.
Stocks to buy
While many sectors look positive, investors should avoid blind-betting and focus on quality.
There are more than 50 stocks suggested by brokerage firms ICICI Direct and Edelweiss that may give decent returns in the medium to long term.
There are more than 50 stocks suggested by brokerage firms ICICI Direct and Edelweiss that may give decent returns in the medium to long-term.
“The market is giving you more and more opportunities to buy into the stocks you wanted and this is the time to buy, not to sell and certainly not to short,” said Srivastava.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.