Bloodbath on Dalal Street: Is it time to book profits now?

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Bloodbath on Dalal Street: Is it time to book profits now?

It was bloodbath on Dalal Street. The Indian market corrected very sharply. Experts feel there could be further downside. They are cautious on the market now and are advising investors to book profits.

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Excerpts from Closing Bell on CNBC-TV18 Watch the full show » Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news KEC International | Apollo Tyres |

Moneycontrol Bureau

It was bloodbath on Dalal Street. The Indian market corrected very sharply and witnessed its biggest fall in the last 16 sessions led by heavy sell-off in banks, metals, telecom and infrastructure stocks.

The Nifty nosedived to 5,505 losing 101 points. The Sensex too shed 283 points to shut shop at 18,145.

Although the correction was expected, after the recent run up, the quantum of fall has taken many experts by surprise. 

Sudarshan Sukhani of s2analytics.com was not expecting such a sharp sell-off. "The trade is no longer on the long side. Aggressive traders can now look to go short on rallies. It is only for aggressive traders who have to be in the market. Otherwise, the correct approach is to wait patiently for this correction to get over. It could end in two days or 20 days, we do not know that now," he advises.

Experts feel there could be further downside. They are cautious on the market now and are advising investors to book profits.

Anish Damania, business head of institutional equities at Emkay Global Financial Services believes that the downward cycle for the market is not over and the valuation cycle with respect to interest rates is way ahead. "The market has to correct to a large extent of the entire rise over the next six months," he adds.

Damania has advised investors to book profits in infrastructure, banking and financial stocks where there has been a massive rally.

Sanjay Dutt, director of Quantum Securities holds a similar view. He feels the market is likely to see 5% downside from current levels, after the recent sharp upmove. "If you have profits and if you are sitting on reasonably large long positions, it's time to take them off the table," he suggests.

Meanwhile, Saurabh Mukherjea, head of equities of Ambit Capital feels February is still a safe territory because of quantitative easing by the ECB. According to him, corrections in February will be contained by the ECB's promise of a QE on February 28. "In March, there are greater chances of profit taking. March could be a month of pain with uncertainty around elections and the Budget," he warns.

Dilip Bhat, joint managing director of Prabhudas Lilladher would be cautious on a long-term basis. "The market will be vulnerable to weakness in the long-term. In the short run, it still seems to be pretty uncertain. I think one should still flow with the FII money that is coming in. But, on a slightly longer term basis, there is no doubt that fundamentals simply don't complement the current valuations at these levels. So, I would certainly be cautious on a longer term basis. But in the short-term, I just don't have a great idea as to which way this market is moving," he explains.

Bhat further says, liquidity still seems to be dictating the short-term. "I don't think anybody has a real handle as to how this liquidity is going to move. So, in such a scenario, it becomes little difficult to answer that whether it's going to be shallow correction or a deeper correction," he adds.

However, corrections can be excellent opportunities to buy stocks at attractive levels. For Prakash Diwan of Asit C Mehta Investment Intermediates it a right opportunity to buy. "There are still pockets available, we have been recommending investors select pharma and FMCG counters. Get out of banks, move into some of these promising areas," he recommends.

Also read: Time of basket buying over; be stock specific, says PN Vijay

On the other hand, Bhat will watch Amara Raja Battery , KEC International and Apollo Tyres very closely. "Amara Raja Battery looks interesting, if it comes in for a correction. KEC looks a lot more interesting largely because Power Grid has a very ambitious plan about the transmission towers. So, KEC is available at a very cheap rate. I think Apollo Tyres has size, liquidity and possibly even a good bottom-line growth," he advises.

When there is such a huge downward movement, one should be cautious. Booking profits would be a wise strategy now.

Vini Amesar.
vini.amesar@network18online.com