FIIs net sold more than Rs 25,000 crore worth of shares in July-August, while DIIs bought over Rs 28,000 crore.
A 35bps repo rate cut by the Reserve Bank of India did not help the market and the sell-off continued. The economic slowdown, more downgrades than upgrades after Q1 earnings, liquidity crisis and global trade war tensions still weigh heavily on the market.
Adding to the woes, the RBI cut its GDP growth forecast for FY20 to 6.9 percent from 7 percent earlier, with risks tilted to the downside.
In addition, the consistent FII outflow since the budget and sharp fall in rupee against the US dollar also dented market sentiment.
Foreign institutional investors net sold more than Rs 25,000 crore worth of shares in July-August, though domestic institutional investors (DIIs) bought more than Rs 28,000 crore worth of shares in the same period, the Moneycontrol data showed.
As a result, Sensex fell more than 7 percent and the Nifty shed 8 percent since Budget week. The broader market has been worse with Nifty Midcap index falling 10.5 percent and Smallcap index losing 13 percent in the same period.
“We maintain our cautious stance on Indian markets. The earnings season till now has been tepid due to the economic slowdown. Hence, domestic sentiments are expected to remain weak. Globally, the recent escalation of trade tensions between US and China will keep market participants on edge and cause volatility in oil prices as well as currency,” Ajit Mishra, VP-Research, Religare Broking told Moneycontrol.
Joseph Thomas, Head of Research, Emkay Wealth Management also said there is overall slowdown seen in earnings.
The recent fall in markets have brought the market valuations border-level attractive, but the earnings downgrades coupled with the economic slowdown can again hit investor sentiment as, despite the absolute fall at an index level, markets may continue to appear slightly overvalued, he added.
Though most experts retained their cautious tone, they advised buying quality stocks in a gradual manner as they feel the market recovery could be seen either towards the end of the year or next year and quality stocks will give good returns in next 1-3 years.
A mistake that usually retail investors make is to buy on the basis of decline in the stock prices, without looking at their financials. Instead, the focus should be on stocks with strong corporate governance, healthy balance sheet, comfortable valuations and good growth prospects.
“In fact, these are the times when some of the marquee names are available at an attractive valuation, thus providing a margin of safety,” Siddharth Sedani, Vice President – Equity Advisory, Anand Rathi Shares and Stock Brokers said.
Thomas also said this is an ideal time for investors to review their portfolio and also to reflect, as a prelude to making fresh strides in the market place.
Here are top 15 quality midcap stocks from automobiles & components, banks, capital goods, diversified financials and gas utilities by Kotak Institutional Equities. These stocks could give 11-98 percent return.
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