Buckle up! Market turbulence to continue, warn experts

Moneycontrol Bureau

It's been five turbulent days for equities in India, and unluckily the consensus is that things will not let up anytime soon.

Weak economic data from around the globe, waning foreign inflows and heavy selling pressure from domestic institutions weighed down the market, sending Indian benchmarks tumbling over 3% this week.

For today, the market staged a stunning intra-day pullback, but in the end, the bears won with the Sensex crashing over 120 points to end the day at 16,300. The Nifty closed at 4,923 down 36 points.

Rahul Mohindar of viratechindia.com doesn't give much credit to the pullback we saw today. Since the market has dropped 9-10% in the last 10 days, he is expecting a recovery of about 50-100 points on the Nifty. However, considering there is no strength in the market, Mohindar's advice is to look for opportunities to short.

On the downside, Amisha Vora of Prabhudas Lilladher says that the market has established 4900 as a base for itself, but sees the market trading in a range from hereon. "But I feel that the upside will be capped at 5250 levels," she added.

With this view, Vora suggests holding onto pharma companies in one's portfolio as they are bound to benefit from the rupee's depreciation. Beyond that, she believes banks are a good bet at the current low levels on the Nifty. "They seem to have come under a reasonably good valuation parameter, so private banks and a couple of PSU banks will be a good place to keep playing this rally," she advised.

With the lack of any political or regulatory progress, everyone is crossing their fingers and hoping that oil falls below USD 100 per barrel, which will give a much needed boost to the Indian economy. "Given how weak the economy is, if oil goes to USD 100, the prospects of a 50 bps rate cut from the RBI in the next two-three months will be much greater," said Saurabh Mukherjea of Ambit Capital.

Apart from the price of oil, Vora says that any positive development on oil subsidies will help push the Nifty to around 4950 levels.

IIP data shocks Street

The market was hit by disappointing industrial output data which indicated that the Indian economy has contracted by 3.5% in the month of March.

The Sensex and the rupee extended its fall on the back of this unexpected contraction. The decline, however, was capped as traders did not put too much stock on the volatile data.

Given the brutality of the IIP data, Mukherjea says that the street should be glad that the market didn't fallen much more than it did. "The rupee remains weak, FII sentiment remains weak and this sort of macro data obviously exacerbates the problem, so we should be happy that the index didn’t fall more," he said.

Ambit Captial's GDP forecast for FY12 stands at 7.1%, but Mukherjea says that it may fall below 7% because there doesn’t appear to be a turning point for the economy. The present consensus is that GDP for FY12 is likely to come in around 6.7-6.8%.

Anisha Mappat
anisha.mappat@network18online.com