Don't exit in panic; see 5500-5525 as support: Experts

The markets have cracked as the Reserve Bank of India measures are believed to be regressive that will negatively influence foreign investors.  However, experts believe that besides the fear of FII outflows, the lingering problems of NSEL also impacted sentiment. They advise investors not to exit in panic as Nifty will likely find support at 5500-5525 levels.

Also Read: Will Nifty plunge to 5450 sooner than later? Here's what the experts feel about the carnage: Ambareesh Baliga, Edelweiss Q: It is not the best of mornings but what is going on in the markets right now, the way we have lost those 140 points and now just back at 5,600, what is going on?
A: The way things are – whatever the actions have been taken by the government in the last few days has been taken as a regressive sort of a step. This is the view which is going around in the market and possibly because of this, it is very much possible that the foreign investors may also take a negative view and possibly turn out to a certain extent. Because of those fears, fairly we are seeing the markets crack like this but the way things are, I don’t think government had today the option than to take drastic action. Q: In reaction to all these fears, are we just seeing perhaps short positions in the futures and options (F&O) space or have we seen actual significant cash outflows today so far in the markets by the foreign institutional investors (FIIs) as well as domestic institutional investors (DIIs)?
A: Earlier also we had taken some support at closer to those 5,500-5,525 levels. Even this time, we could see some decent support at those levels where we could see some amount of short covering. So I do not think at these levels, one should be exiting in panic. Jagish Malkani, Member BSE & NSE Q: We have somehow managed to just about stay put at 5600 for now but with the rupee now already having hit 62 and with levels of 5500 and below perhaps now on the horizon what would be your take on the markets from hereon?
A: I still believe that 5500 is very strong resistance point. I think under present circumstances of election finale etc the government is doing this to contain the current account deficit (CAD) and the target of 70 billion etc are achievable. Every day new measures are being announced. I think personally today’s carnage also is a bit to do with this lingering NSEL crisis because frankly other than weak global and Asian markets this is spooking the fact that everyday there is new news on Rs 6,000 crore whole how it will filled etc. So, one crisis is leading the problems to the other. Q: I take your point that perhaps just talking about points is not that significant but even sentiment right now is just so battered?
A: Clearly. As the rupee goes for a toss, but let us face it – barely a day before yesterday, last couple of sessions have been pretty strong especially for fallen angles, the small-cap, mid-cap and the friendless sectors, metals etc so everyday is a new day but clearly very volatile times and very nervous times. Amit Dalal, Executive Director, Tata Investment Corporation Q: Markets have fallen 2.5 percent, now the key question on every investors’ mind as we keep hearing bad news, we have seen the markets fall from the levels of 6,000 all the way down to that 5,600 mark, so what should they be doing with their investments and which key sectors perhaps you would recommend investors to hold on to the position or perhaps this is time to start exiting because there is more downside in store?
A: I do not know about what investors should do with regard to their present position but when you get 10.5 percent from banks and there is such a liquidity crisis in the market, the case for equity obviously has shrunk substantially. I do not see any reason why anyone should take an equity risk when you can get risk-free return practically from the banks itself. Q: Would you be recommending that anyone who is holding on to long positions right now cut short the positions?
A: I am not a trader by that kind of a magnitude. So I cannot recommend to others but until this whole situation becomes clear in terms of how we are going to manage our growth vis-à-vis our forex, the markets are going to be volatile and it is very uncomfortable place we are in right now.