Despite the steep correction, the overall trend is bullish, and investors can use this fall to gradually increase their equity exposure by investing in quality companies, according to analysts.
Indian equity markets witnessed heavy sell-off on Tuesday amid intense geopolitical tensions. The sell-off triggered by heightened Ukraine-Russia tensions and news of imminent war have eroded the market capitalisation of BSE-listed companies by Rs 9.1 lakh crore over a period of five days. February 16 was the last day when the Indian benchmark indices had closed in the green but since then, the fall has been continuous. Sensex today fell around 1,000 points to below 57,000, and Nifty 50 also declined over 2% to below 17,000. Despite the steep correction, the overall trend is bullish, and investors can use this fall to gradually increase their equity exposure by investing in quality companies, said analysts.
“A lot of uncertainties in the financial markets have aided bears to tighten their grip on the market over the last couple of days on account of developments, for instance, Ukraine-Russia possible war, fed reserve policy tightening measures, sky-rocketing inflation, lingering omicron virus, semiconductor shortage, and supply chain bottlenecks. Therefore, it can be contemplated that the benchmark indices might consolidate going ahead, volatility on the broader front would be hard to handle,” said Ankur Saraswat, Research analyst at Trustline Securities.
Till Nifty keeps above 200-DMA, don’t go short
“Markets are again down due to negative sentimental affect given the renewed geopolitical conflict between Russia and Ukraine which had overnight escalations. However, coming back to markets, they are bound to get negatively impacted from the sentimental stand point. However, despite that, the gap down opening has happened exactly at the 200-DMA which stands at 16864. High Crude prices are also definitely a negative for the markets; however, rather than viewing it individually, we have to read it along with the technicals,” Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and founder, Gemstone Equity Research & Advisory Services, told TheSpuzz Online.
He further said, “So, so long as the NIFTY keeps its head above 200-DMA, investors should not go short aggressively. The reason is that if the geopolitical tensions ease, we can see a sharp short-covering led rally as well. Investors should definitely buy quality stocks with a medium term investment horizon. For short term, investors/traders may not buy but I would definitely not advise going short at present levels.”
Use correction to increase equity exposure, accumulate quality large caps
Naveen Kulkarni, Chief Investment Officer, Axis Securities, said, “Volatility in markets because of geopolitical issues linked to Russia and Ukraine should not last long. Chances of a major flare-up look small while sanctions on Russia are expected not to be as strong as the ones against Iran, as no one wants crude prices to stay at elevated levels on the back of already high inflation. Markets below 17000 offer a good risk-reward tradeoff. One should use this correction to gradually increase equity exposure by investing in quality companies.”
“Structurally, over the past five weeks’ index has retraced 80% of the preceding four weeks’ rally (16410-18350). Slower pace of retracement signifies that the broader bullish structure is still intact. Thus, extended breather should not be construed as negative, instead dips should be capitalised to accumulate quality large caps as we do not expect Nifty to breach key support of 16800-16780,” said Raushan Kumar, Derivative Analyst, IIFL Securities
Book profits on short positions here
Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments said, “As expected the Nifty has fallen over 300 points post the breaking of the 17200 support level. Traders can book profits on their short positions here as we are at the lower end of the current range which is 16800. If we break that, a new opportunity to go short emerges. On the upside, the resistance is at 17200-17250.”
Capital goods, infrastructure, real estate, banking, consumer goods among good bets
“The market is witnessing a sharp cut in early trade of Tuesday’s trading session on the back of intense geopolitical tension. We are in monthly F&O expiry week therefore we could see a surge in volatility whereas March is going to be a very volatile month due to lots of events like geopolitical uncertainty, results of state elections, US Fed meeting, etc. The overall trend is bullish but we may have high volatility over the next month therefore short-term traders should remain light while long-term investors should look at this correction as a buying opportunity,” said Parth Nyati, Founder, Tradingo.
“We are very bullish on capital goods, infrastructure, real estate, banking, consumer goods, and auto ancillaries space therefore we advise investors to look for buying opportunities in these areas. Technically, Nifty is trying to respect its 200-DMA which is currently placed around 16850 while if Nifty starts to trade below 200-DMA then correction may see further extension towards 16000/15500 levels. On the upside, 17300/17500 are important resistance levels; above this, we can expect positive momentum in the market,” Nyati added.
Keep booking profits on higher levels and investing on lower levels
“Overall, the reason for the fall in the market is due to the crisis in Russia and Ukraine – which has temporary news based impact on the market and another reason could be due to trade war, US Inflation, and GDP imbalance in the United States – this is an awful situation that can have a huge impact on the global market as due to these reasons US bond yields are increasing which also results in selling in the emerging market like India. In the Indian market, FII is selling in the cash segment and they have sold nearly 13,0000 Crores in the last five months, but the market is only down 10% because of domestic inflows. FIIs now sells Max up to this limit based on historical data,” said Gaurav Garg, Head of Research at CapitalVia Global Research.
“The Market will be volatile due to the macro situation, but we will fare much better internally than the rest of the world economy. GDP and inflation are on track and we remain an emerging market across the globe, according to expectations. DIIs and mutual fund inflows now have more clout than FII outflows. Investors must be patient and not panic in this scenario; the economy is still healthy however the market will be tough and volatile this year, therefore, keep booking profits on higher levels and investing on lower levels. Today, all the broad indices are down along with the large cap shares. Investors must add blue-chip stocks in selected IT, Metal and Banking shares,” Garg added.