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Should one try and buy into this dip or is it better to just wait it out?
If we look at the market movement of last four odd months or so, while at the end of November we did see the largecap indices – Nifty and Sensex – touching fresh life high but inherently, there was not any strength and a similar rally was not witnessed in the mid and small caps. So to that extent, the breadth of the market was not there and participation was not there at all.
Even in largecaps, it was more sectoral and stock rotation which was keeping the Nifty and the Sensex in a range in the last three or four months. Now that range had to be broken technically, sentimentally and developmentally. Whichever way we try to analyse the market, it had to be either broken on the upside or it had to be broken on the downside.
Of course, it could have continued in that range for some more time. But on Friday, the market chose to break that range on the downside, led by various factors.
So while there is seemingly a news flow which seems to be behind, let us keep in mind that we have not had any support of global money inflow over the last few months. In fact, if at all, there has been continuous outflow that domestic investors have been trying to support but how long will the domestic investor continue to support – whether institution or individual.
On the fundamental side, in the 15-20 days, very quietly, the commodity prices have started inching upwards and for an Indian economy that is clearly negative. Brent had fallen below $80 and is now back to $88-89-90.
The same is the case with metals. In the beginning of 2022 mostly, the metals fell and then they continued to hold on but now in last 15-20 days or odd or so we have seen steel prices going up, tin prices going up and also zinc and nickel prices going up. With that, the result season is not supporting in a big way. All these factors have come together and have resulted into this context of the market. So I will conclude that in terms of participation, traders should strictly go by their stop losses. For the medium-term investor, a lot of events are lined up this week. We have Budget along with that and the US Fed decision. Then, with a little lag will come our own RBI’s decision but that is way off. But certainly one can wait till the Budget. It does not matter if one has to buy at a little higher level.
Of course, if somebody wants to use 10-20% of the money that he was holding on to, one can probably take some brave calls at that level as one may not get these levels this week.
What will you do with the Adani Group of stocks?
I would refrain from commenting on individual sets of stocks as I have not taken compliance approval.
Would you buy any of the banking names this fall or wait for lower levels but keep on your radar?
One will have to take that basic call on the market. The weekend has thankfully given a lot of time for people to digest, to analyse and to revisit the valuations for technical analysis. Of course, this week we have two major events; one is Budget for us in India and globally the US Fed meeting almost on the same date and those are big events.
The market has corrected very sharply, not as much in the indices but certainly the individual sectors and stocks have fallen much more which happens in a rising market also is that rising indices do not rise but individual stocks rise much more. Going forward, assuming that my view on the market remains a subdued or a range-bound kind of market, the clear out performance will come from IT and banking.
These are the two spaces where we will see safe haven and the investors returning to the market faster. Also whatever results have come till now, these two sectors – largely IT and banking – have shown reasonably decent numbers in terms of growth in terms of profitability. The same has not been reported by the limited number of results that have come in from some of the consumer durables, the limited number of results from cement and some others.
Clearly in terms of outperformers, in a subdued market, buying interest will be more towards the IT sector as a safe haven and banking sector as a participation of high beta, both in the rising as well as in the falling market
The concerns in the market based on past experience is that when you have a leverage sell-off and when bonds of a particular large entity go down, it normally leads to some kind of banking imbalance. That could be a reason why some of the banks are selling off. Is this a thought which will continue to linger or can this be disregarded?
I do not know. Should I call them interpretations? Not necessarily interpretations but we are trying to do understandings or analysis on the basis of one single day movement, maybe two-three days here and there. To me, it looks like a very short period of time and there have been similar movements in the market as well and similar news flows related to many other sectors or stocks or business groups earlier also.
So I would wait for the market to construct itself. When the market does not know what to do and how it was looking like for four-five months when it was continuously range bound, The market has to find some reason to break out of that range. The reasons could be to help it break upside or downside. In this case, the reasons, the news flow, the developments that have happened have helped it break on the downside which is very good because a lot of money which was probably waiting on the sidelines, will get an opportunity to come in.
There have always been concerns on the valuation of the Indian market. Those will get addressed partly. Finally the valuations have corrected a little bit. They may not still reach the so-called sane levels or levels at which one would really be comfortable buying because when those levels come, one never buys and we have some events coming up and especially the Budget. Who knows, there could be a completely sentimental turn around in the market depending on what the government gives.
I very strongly feel that despite being the last full Budget of this government, the Budget will continue to be capex oriented and more dependent on multiplier effect and longer-term employment generation instead of a populist Budget. The economy and the stock market will like such a Budget very much compared to a populist Budget, which will be liked by the people but not by the market.
So wait and watch. Since the big event is coming, one would not be comfortable taking calls on such a short one or two-day kind of news flow development. Of course, the opportunities also get missed. I would not take a call so early of things having gone completely bad.
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