Its mayhem on 'stock streets' across the globe. Traders have incurred dumbfounding losses while investors are shell shocked. The same crashing markets pattern is unfolding everywhere, whether it be China or the USA or anywhere else. And India has been no exception. Despite it's better than others fundamentals and a highly impressive 7% growth prospect, the fast declining prices in Indian equities is numbing, to say the least. And despite all the confidence building balming by the government and its financial arms, there seems little that can soothe fears. So what does an investor do in such a situation? One set of experts say: Buying in a crashing market is akin to grabbing a falling knife. Others say, “Buy in fear and sell in euphoria.” And amidst these contradicting views is a third one, which advises 'Staying put till the storm passes.' Perhaps that may be the best course for long-term investors to follow...
Last week, the Sensex declined 1190 points or 4.51% to close at 25201, while the Nifty fell 346 points or 4.33% to close at 7655. On Friday alone, the Sensex fell 562 points while the Nifty declined by 168 points to close at its lowest level in 14 months. Many stocks registered fresh 52 week low figures as both the indices fell for the fourth consecutive week. Investor wealth slumped by Rs 1.92 lakh crore. Foreign investors pulled out nearly Rs 4,000 crore from the stock markets in the last four trading sessions amid weak GDP numbers and lackluster global cues. This comes on top of a record net outflow of Rs 17,428 crore from equities last month. This was the highest net outflow by foreign portfolio investors (FPIs) in a single month since 1997.
Says Jayant Manglik, President, Retail Distribution, Religare Securities “ For the second consecutive week, pessimism prevailed on the domestic front in response to global worries and disappointing economic data. Participants were upholding cautious approach from the beginning while awaiting GDP figure, which showed lower than expected growth. Also, the index of eight core industries slipped to three months low at 1.1 percent in July, indicating a possible contraction in IIP figure ahead. The data of Nikkei India Manufacturing PMI also showed weak trend as it grew at a slower pace in August. The weakness further extended due to fear of an interest rate hike by the US fed and feeble monsoon. Amid negativity, a relief rally was seen on Thursday as the Chinese market remained closed, which helped volatility to ease a bit. But, the last session dampened all the hope of recovery and pushed the benchmark index to newer low. Finally, the benchmarks concluded the week with a loss of over 4 percent”.
“Considering the last week’s close, the coming week would continue to keep the participants on their toes. On the domestic front, they will be eyeing IIP data scheduled on September 11 and recent data of core sector has set the ground for weak numbers. Though there’s no major planned event or data except IIP but investors are hoping for some positive surprise from the government and the RBI, to help in stabilizing the equity market. Needless to say, the global trend will also influence the move as participants are keenly eyeing updates mainly from the China and the US”.
Manglik believes that “though uncertainty and pessimism is still looming across the globe, but the existence of major support zone in benchmark index is pointing towards the possibility of a pause in prevailing corrective phase. On the benchmark front, the existence of support around 7600 on multiple time frames may help index to witness a breather and help volatility to cool down a bit. Meanwhile, traders should uphold cautious approach and strictly avoid overtrading as we have been seeing erratic moves across the board. Among the sectoral pack, IT and Pharma are still in better shape while the rest are reeling under pressure so prefer defensive over the rate sensitive until clarity emerges”.
Sanjeev Zarbade, Vice President, Private Client Group Research, Kotak Securities is of the view “So far as India is concerned, the delay in passing key reforms has also contributed to the disappointment among investors. Given the weak investor sentiment that is prevalent currently, a rate hike may not go down well with most emerging markets. Having said that, we note that valuations are coming back to reasonable levels and long-term investors should go for buying stocks of quality companies.”
Arun Gopalan, VP, Systematix Shares & Stocks says, “The uncertainty over the US Fed rate hike is spooking global markets and the Nifty is no exception. We could witness further downside on the Nifty if the Fed hikes rates in September. But on the other hand, if we observe the Nifty from the technical perspective, the 61.8% and 38.2% Fibonacci Retracements from the post-election rally and from the August 2013 lows, coincide at 7590. Therefore, we believe the Nifty will receive strong support at 7590-7600 levels. Only if the Nifty breaches and sustains below these levels, we could witness a fall to as low as 7100.
So what will this week hold? After witnessing huge losses recently, stock markets may see a bounce back going ahead and would take cues from IIP data slated to release later in the week, movement of rupee, overseas investors' investment trend and global news, say experts.
"Considering last week's close, this week would continue to keep participants on their toes. On the domestic front, they will be eyeing IIP data scheduled on September 11. Though there's no major planned event or data except IIP, investors are hoping for some positive surprise from the government and RBI, to help in stabilising the equity market.
"Needless to say, the global trend will also influence the move as participants are eyeing updates mainly from China and the US," said Jayant Manglik, President, Retail Distribution, Religare Securities. From the global front, investors are eyeing monetary policy action by the Federal Reserve."For the short term, the global market movement will be dictated by the FED meet. We expect volatility to stay until FED gives an indication regarding a rate hike," a report by Bonanza Portfolio said.
The prospect of a higher US rate, which leads to risk aversion in riskier assets has so far spoilt the scene in emerging markets, which have run up massive losses of late."Bearish sentiments are running too high and, therefore, a bounce back is expected this week. All attention will start shifting from China to the US to take the cues on interest rates," said Jimeet Modi, CEO, SAMCO Securities.
"Concerns of a deep-seated slowdown in China has sapped investors’ risk appetite across the globe. Also, weakening Indian currency, rainfall deficit and below estimates macroeconomic data continue to hurt investors' sentiments. In the coming week, the government would release its Q2 current account balance, August trade balance and IIP data for the month of July. The big plunge in Indian equities recently, triggered by global sell-off, offers a significant buying opportunity for investors. Nifty has fallen over 950 points of 11% in the past four weeks dragging the index below the 7,700 levels. Going forward, Nifty has plenty of ground to cover before confirming a reversal. However, Nifty has formed a short-term bottom after taking support around its monthly trend-line and 100-WMA. We expect the index to consolidate after a volatile week in the short-term, before resuming higher."" said Vijay Singhania, Founder Director, Trade Smart Online.
Top 10 Sensex Companies Saw Rs 84,209 Cr Erosion In Market Cap Last Week
The top 10 most valued companies on the 30-share Sensex saw their combined market valuation plummet by Rs 84,209 crore last week, with ONGC and RIL taking the biggest hit in an overall weak stock market. On a weekly basis, the Sensex lost 1,190.48 points, or 4.51 percent, to 25,201.90. This is the fourth straight weekly plunge for the index.
The market valuation of ONGC shrank Rs 15,357.1 crore to Rs 1,93,011.86 crore. RIL's market capitalisation tumbled Rs 11,527.8 crore to Rs 2,70,579.56 crore, while that of HDFC fell Rs 9,229.71 crore to Rs 1,80,038.45 crore. The market cap of ITC narrowed Rs 8,905.99 crore to Rs 2,53,901.04 crore while Infosys lost Rs 8,475.72 crore to Rs 2,46,645.92 crore.
HDFC Bank saw an erosion of Rs 7,739.77 crore at Rs 2,50,623.13 crore and CIL took a hit of Rs 6,726.92 crore to its m-cap at Rs 2,19,019.94 crore. The market capitalisation of Sun Pharma was down by Rs 6,352.99 crore at Rs 2,06,604.59 crore as HUL lost Rs 5,741.39 crore to Rs 1,79,675.61 crore. Similarly, TCS saw a dip of Rs 4,152.51 crore in m-cap at Rs 4,99,367.90 crore. In terms of ranking, TCS took the lead, followed by RIL, ITC, HDFC Bank, Infosys, CIL, Sun Pharma, ONGC, HDFC and HUL.