Analyst advise investors to keep their shopping list ready as volatility could increase, they suggest that investors should avoid high beta names.
The market remained in the bear grip throughout the week and pushed the Nifty 50 below crucial support levels on closing basis. The Nifty 50 plunged 3.7 percent while the S&P BSE Sensex was down by 3.8 percent to post their biggest loss since October 2018 for the week ended May 10.
Trade tensions between the US and China muted corporate earnings from India Inc, election uncertainty and persistent selling by foreign institutional investors (FIIs) led to the fall in Indian markets.
FIIs have pulled out nearly Rs 4000 crore for Indian equity markets so far in the month of May after pouring by about Rs 60,000 crore in the first four months of 2019.
“The Nifty has posted the biggest loss on a weekly basis since the last October as the sell-off in global in the domestic market has further extended. Weak global sentiments, Trade war escalation between US-China and heightened VIX overshadowed bullish undertone for the entire week,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.
The broader market outperformed slightly compared to benchmark indices in the week gone by. The S&P BSE Midcap index was down 2.67 percent while the S&P BSE Smallcap index saw a dip of 3.05 percent in the same period compared to about 4 percent fall in the benchmark indices.
The real carnage was seen in individual stocks. As many as 17 stocks in the S&P BSE 500 index lost 10-20 percent in five trading sessions which include names like Reliance Industries (RIL), Tata Motors, Indiabulls Ventures, Indiabulls Real Estate, Dewan Housing Finance, and Eveready Industries, etc. among others.
As many as 35 stocks in the S&P BSE 500 index dropped to their fresh 52-week low which includes names like Apollo Tyres, Graphite India, IDBI Bank, Bosch, Cadila Healthcare, Biocon, Sterlite Technologies, Alkem Laboratories, etc. among others.
Analyst advise investors to keep their shopping list ready as the volatility could increase but avoid high beta names and expose themselves to high leverage especially when we are just days away from the election results.
“As we head closer to central election outcome, the indices could continue to exhibit high volatility. Further, global uncertainties (especially concerns over deteriorating US-China trade relations) and corporate earnings could also keep the markets nervous,” Jayant Manglik, Retail Distribution, Religare Broking Ltd told Moneycontrol.
“Under such a situation, investors should be selective in stock picking. Cherry picking in phased manner can be done in quality counters (large-caps / mid-caps / small-caps), which are attractively valued and hold promising future,” he added.
Manglik further added that as we feel investors should have less exposure to high beta counters, as correction in these stocks could be severe in the event of unfavourable election outcome, leading to faster erosion of investors’ wealth.
Technical Outlook:
Technically, Nifty is now trading below the crucial short term moving averages such as 5-days exponential moving average (EMA), 13-EMA, 20-EMA, and 50-EMA. The Supertrend indicator, as well as MACD, have both given sell signal on daily charts.
“Going by the weekly time frame chart, this zone of sub 11300 levels is likely to provide decent support for our markets while on the upside 11549 will act as key resistance for the Nifty index,” Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking told Moneycontrol.
“As we are heading for yet another mega event on the domestic front i.e. the election verdict on May 23. All these events are likely to weigh down heavily on traders’ sentiment and should probably set the path for next move,” he said.
Chavan further added that the pragmatic ploy would be to stay light and avoid trading aggressively in the market, and in such difficult times, investors should be prepared with the list of marquee propositions which can be accumulated in this decline.
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