There is a sea of red on the Dalal Street—the markets capituated under weak global cues and the Nifty on Tuesday slipped below the 4,600 mark for the first time since September 3.

The sell-off was characterised by dismal breadth with the advance decline ratio settling at around 1:6. Another disturbing feature was the high volumes, with the turnover crossing the one lakh crore-mark yet again in the new series.

A concern

Ved Prakash Chaturvedi, Managing Director of Tata Mutual Fund feels the orchestrated correction happening in the global market has played a spoilt sport in the Indian market. “Corrections are happening in the global markets, money has been pulled out of India. I think there is some concern on this entire issue of interest rates and what it will do to sentiments and equities also; the run up had been quite sharp, some profit booking is happening. Earnings numbers too have come out and I think there is gradual improvement in the outlook possibly the market expected galloping growth in earnings which is not happening. It’s a combination of all these and markets are taking up pause and breadth.”

The hectic equity raising, dilution, and money raising seen in the past couple of months, is contributing to the concerns, Chaturvedi said. “The desperate response of many promoters to raise equity in this market and some of those placements, have not given desired returns.

Road ahead for markets

Chaturvedi feel a 15-20% correction from the peak after such a rally is not something which is unknown or unheard of. “In this particular situation the overseas news flow also exacerbated the fall that we have seen. We are not done yet in the short-term—it will certainly fall a bit more. But in the longer-term we are very positive. We have always felt that earnings growth in India will only improve gradually. I think the market anticipated more than what possibly the companies could deliver and there is some correction of anticipation of what’s happening and at a particular level longer-term we are extremely positive, some of the high beta sectors, which are now falling quite steeply may become a good buys if the fall is steep enough.”

The market, he said, is at some crucial support level. People would wait to watch how this holds or otherwise, he adds. “I have a feeling that people might wait a bit more before they come in, some amount of buying may emerge at somewhat lower levels but not yet.”

Meanwhile, Rahul Mohindar of viratechindia.com feels the Nifty won’t open short right now. “Fortunately technically this was not too difficult a fault to catch especially below 5050. Over the last two weeks I have been expressing bearish views on the market and several stocks. I think this fall is probably going to continue. The question now is about where we are going to see support. It is not about can we really go out and buy the market at this point or sell the market. 4580-4590 somewhere else or another 20-30 points there could be some blink of support coming in but the bottomline is what if we kind of go and crack this level of 4600-4580 out. I think the next point below this could be somewhere between 4400-4420. One should still be trading on the short side of the market.”

Experts take on stocks and sectors

Buying may emerge in metals, engineering capital goods companies and real estate, according to Chaturvedi. “There is now some sense that the kind of momentum in terms of business growth that you can see from the index heavyweights whether it is the petroleum companies or telecom companies etc will be limited and hence focus will shift to the smaller stocks in the market where there is some earnings growth, where there are positive cash flows, reasonably good management and one can expect that there would be reasonable earnings growth over the next few quarters and in FY11.”

Mohindar recommends investors to go short on Unitech. Though he sees support at Rs 320 per share for DLF but doesn’t advice to put out fresh shorts because the risk reward is going to be against you. He thinks Suzlon has broken a very important support level so there is a scope to see about Rs 52-55 that is a level which could come in short term.

Telecom, Mohindar said, is still not out of the woods. The entire sector is in a mess, especially Reliance Communication. “Looking at Idea Cellular and Bharti charts, I do not think we could call today’s move a breakout but yes it is definitely a stand out performance. One will need to read more into this but what we have seen today does not really point me to a break out. I still think this is a short-term move and I would like to wait and see when the entire sector really breaks out in tandem.”

Siddharth Bhamre advises buying 4600 call at 115 with a stop loss of 70 and a target of 210. He also advises buying GE Shipping futures at Rs 228 per share with a stop loss of Rs 218 per share and a target of Rs 260 per share.

Ashwani Gujral advises buying Reliance Natural Resources Limited (RNRL) with a stop loss of Rs 60 per share and a target of Rs 72 per share. He does not have any positions in the stock.