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Experts say market correction along expected lines; Laurence Balanco of CLSA sees support for Nifty at 14,300 & 13,500

The correction was overdue as the market was trading at higher valuations and most of the positives had been factored in, say experts.

February 26, 2021 / 03:47 PM IST

Rising bond yields, geopolitical tensions and concerns over inflation have piled pressure on the market. Experts, however, believe a correction overdue as the market has been trading at higher valuations and most of the positives have been factored in.

Indian equities witnessed a sharp selloff in the intraday trade on February 26 that dragged the benchmark Sensex down more than 2,100 points and the Nifty below 14,500. Banking and financial stocks led the fall as the Nifty Bank, private bank, PSU bank and financial services indices slipped up to 5 percent. The Sensex closed 1,939 points lower at 49,100 and the Nifty ended at 14,529.15, slipping 568.2 points.

Arvind Sanger, Managing Partner, Geosphere Capital, told CNBC-TV18 that the correction was overdue and the market had already discounted higher earnings.

"A 10 percent correction is very healthy and normal in a bull market. There is time to look at new emerging leaders in the market," said Sanger.

Experts say in case the selloff gets deeper, the benchmark Nifty may find support at 14,300 and 13,500.

"The 50-day moving average at 14,300 is the support for Nifty, below which Nifty may find support at 13,500 which is the January low. The deepest correction would be a move back to the late January low at 13,500 for the Nifty," Laurence Balanco of CLSA told CNBC-TV18.

Balanco thinks it is a correction rather than a major reversal in equity markets. He said the correction was on expected lines and bond yields were the most impactful short-term indication for the equity market.

"As of Friday’s close last week, we have the US 10-year yield up over 20 percent within a four-week period and the reaction that we have seen from equity markets falls in-line with the historic correction that we have seen," Balanco said.

"The key point I would make though, it is a correction rather than a major reversal in equity markets and that is why I still think pulling back towards 13,800-13,500 on Nifty will still be a buying opportunity and that longer-term trend should remain intact."

Balanco said the rate of change in bond yield was more important than the level and if yields reach the level of 1.9 percent, it would put more pressure on the equity market. If the rate of change on yields starts to decelerate, the equity market should be able to digest that and then continue the uptrend, he said.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.

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first published: Feb 26, 2021 03:43 pm