Moneycontrol
May 18, 2017 10:00 AM IST |

Market exhibiting technical weakness but multibagger returns still possible from current levels

The chart structure was giving some hints about possible consolidation or correction but experts believe any correction should be bought into for the long term.

Market exhibiting technical weakness but multibagger returns still possible from current levels

Kshitij Anand

Moneycontrol News

There is no stopping for this red hot bull market which is making record highs on a daily basis. However, Thursday may well turn out to be the day of bears and bulls might take a back seat.

The chart structure was giving some hints about possible consolidation or correction because most of the momentum indicators were signalling overbought levels. Indian market is likely to come under pressure tracking weak handover from Wall Street.

Asian market fell as reforms promised by US President Donald Trump take back seat as uncertainty mounts over his future as President following reports that he tried to interfere with a federal investigation.

The Dow and S&P 500 both sank about 1.8 percent overnight following reports that Trump tried to influence a federal probe, said a report.

Indian market witnessed a record high in the previous trading session and market participants were waiting for a trigger to book profits. It will be a great opportunity for investors to buy quality stocks on decline because the macro story for India remains intact.

The index rose to a fresh record high on Wednesday despite some profit booking. The S&P BSE Sensex hit a fresh record high of 30,692.45 while Nifty50 climbed 9,532.25.

For some experts, the rally has just started and investors can get into stock markets at current levels while some fear a correction anytime because much of the rally is hope based and any disappointment globally or locally could lead to a sharp drop in prices.

“Indian equities are at the bottom and there are plenty of stocks which can give 5-10 bagger returns from current levels,” Porinju Veliyath, Equity Intelligence India said.

In an interview with CNBC-TV18, the ace investor, known for spotting small and midcap stocks at the right time and right price, said that Indian investors are staring at a golden opportunity of stocks picking which can continue for 3-5 years.

Most analysts are not afraid of a drop in markets because much of smart money is waiting on sidelines to avail that opportunity. Don’t be scared to invest at current levels, because the long-term trend is on the upside unless there is something major happens in globally.

The domestic institutional investors (DIIs) have made their presence felt after a long time in India equity markets which was historically speaking driven largely by foreign institutional investors (FIIs) flows.

DIIs have poured in close to Rs 14000 crore in Indian stocks market compared with over Rs 30,000 crore poured in by FIIs so far in the year 2017.

The risk-to-reward ratio might not be that high if somebody wants to invest at current levels, while for those who are already holding long positions, this rally can stretch to mount 10K.

However, if somebody is planning to make a fresh entry, they should come with an investment horizon of more than a year to make a decent return.

“As the famous quote says “better late than never” if somebody has missed the opportunity of the fastest rally then he can still make money despite market trading at its lifetime high,” Achin Goel, Head Wealth management and financial Planning of Bonanza Portfolio Ltd, told moneycontrol.

“We are eyeing Nifty at 10,000 levels by FY18, and we feel there is still room for 5% on the broader index that investors can capitalized on. FIIs have turned net buyers after turning net sellers for the entire month of April,” he said.

Goel further added that though equity market is subject to risk and such high valuations it is certainly very risky but we emphasize investors to look at stock specific story rather than playing on the macro story.

Analysts do not foresee a big drop unless something happens globally. US Fed rate hike is largely factored in and any knee-jerk reaction will get bought. However, if geopolitical concerns escalate, crude oil rises are some of the factors which could trigger a risk-off sentiment in the market.

On the domestic front, below normal monsoon, failure of a pickup in earnings growth could lead to some bit of correction in markets.

“The correction in the stock market could be either due to global or local factors. On the global front, the biggest cause for worry at the current juncture is the geopolitical tension between the US and Korea and a significant escalation on this front could lead to FIIs lightening their positions across emerging markets, including India,” Jayant Manglik, President - Retail Distribution, Religare Securities told moneycontrol.

“As far as the domestic triggers for a correction are concerned, any significant disappointment in earnings over the next couple of weeks could lead to some pull-back in the Indian stock market. And, any significant deviation from the IMD forecast could affect market sentiments in June-July 2017,” he said.
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