Indian investors should not panic, good time for best bargains, says Mohit Nigam of Hem Securities

Mohit Nigam is the Head - PMS at Hem Securities

After the Russia-Ukraine war-led selloff, some stocks have corrected more than 35-40 percent. "It's a good time to start seeking best bargains. Investors should take this opportunity to invest in fundamentally strong scrips," says Mohit Nigam, Head - PMS at Hem Securities in an interview to Moneycontrol.

Hem Securities is bullish on Indian markets due to low interest rates, global liquidity, and liquidity in India, easy access to markets via smartphones, e-KYC, zero commission brokerages and high broadband speed.

Nigam, with experience across forex, equities, bonds and investment banking, says Life Insurance Corporation of India's IPO is most likely in March but is in a dicey mode amid high market volatility and tensions between Russia and Ukraine.

What is the importance of 200 DMA as well as 200 DEMA in the market? Is it a worrisome factor for the market given the Nifty is way below 200 DMA and 200 DEMA now?

Also read - Ukraine war may delay LIC IPO to next FY, likely reassessment of March listing this week

The 200-day moving average commonly expressed as 200 DMA is a very popular technical indicator among traders looking to analyse the underlying trend. It is an arithmetic average of the last 200 days closing price. 200 DMA is so widely used that when a stock or index touches 200 DMA, the bears start covering their short positions or bulls start accumulating.

It provides the much-needed change in demand-supply change for a reversal. A lot of stop losses are kept at 200 DMA and it is the threshold level for many traders to hold on to their positions. Stocks falling below their 200 DMA indicates short-term weakness and negative bias.

The Double Exponential Moving Average (DEMA) reduces the lag of traditional EMAs, making it more responsive and better-suited for short-term traders. It is a measure of a security's trending average price that gives the most weight to recent price data. While a standard moving average displays a lag time that increases with the amount of time being charted. The DEMA seeks to shorten that lag time to a consistent level.

Technically, after a long time, benchmark Nifty50 closed below the 200 DMA and 200 DEMA and has also formed a long bearish candle on daily charts, but we believe that investors should look at other technical indicators, too, before taking a position and should not rely on only one indicator.

Should Indian investors panic due to Ukraine-Russia tensions?

Also read - Wondering what next? Ignore the near-term turbulence and stay put

The consequences of a war-like scenario lead to higher oil prices, selloff in equity markets and buying in safe haven assets such as gold and bonds. We have witnessed these actions all across the globe for the past few days and believe that markets tend to be volatile due to this macroeconomic situation. Russia is not a major trade partner for India, whose exports to that nation are 0.9 percent of total while imports are 1.4 percent of total. So Indian investors should not panic in this current crisis.

After significant correction, where do you see the value to buy in the top BSE 100 stocks?

On February 24, markets had a severe selloff after Russia launched military action in Eastern Ukraine. The Nifty50 and Sensex have fallen more than 10 percent from their recent highs after brief recovery in January. We believe markets had formed a bottom around 16,000-16,200 levels as panic is short term and the India bull market is not over. Some stocks have been corrected more than 35-40 percent and it's a good time to start seeking best bargains. So we believe investors should take this opportunity to invest in fundamentally strong scrips.

Also read - Removal of Russian stocks from MSCI to divert about $600 mln inflows into India: Edelweiss

We are bullish on the Indian markets as all things are in pretty good places like low interest rates, global liquidity, and liquidity in India, easy access to the markets via smartphones, e-KYC, zero commission brokerages and broadband speed.

Do you see major corporate earnings risk in the current quarter due to elevated commodity prices?

The ongoing crisis between Russia and Ukraine has spiked oil prices to above $100 per barrel. This can have a severe impact on prospects of Indian companies already facing challenges of rising commodity prices. The US and the West have imposed heavy sanctions on Russia that can impact companies that import raw materials from Russia.

Supply chain disruptions is another problem which the companies might face due to the ongoing tussle. Exporters will also feel the heat as the payment mechanism between the two countries can be disrupted because Russian banks have been blocked from accessing SWIFT. All these factors will play a key role in driving corporate earnings.

There is expected corporate earnings risk. Do you think market valuations are high now. Is the risk also a reason for FII selling?

Also read - Ukraine war may see India's import bills topping $600 billion this fiscal, pushing up inflation, CAD: Report

Expectations of future rate hikes by the US Federal Reserve to combat high inflation are rising, after a strong run to a record high of 18,604 on the Nifty in October 2021, with a return of more than 32 percent since January 2021; excessive values have emerged and now geopolitical tensions between Ukraine and Russia are intensifying and are significant causes of FII outflow.

The corporate earnings season just completed, and it was evident that increased input costs are putting pressure on margins. With growing commodity costs, such as oil at over $100 per barrel, the profit risk appears to be increasing. Domestic institutional investors have managed to compensate for the FII outflow to a large extent, as they remain optimistic about India's economic prospects, particularly after the government and Reserve Bank of India made many efforts to bolster the economy in recent years.

It's a smart idea to start looking for the best bargains now and at the same time very critical to pick and choose stocks, rather than just buying any huge stock or index stock. Look for organisations that have strong balance sheets and are expected to grow their earnings in the future.

Can the LIC IPO get delayed due to current market volatility?

Life Insurance Corporation of India is much likely to hit markets in March but is in a dicey mode amid high market volatility and tensions between Russia and Ukraine.

According to finance minister Nirmala Sitharaman, the Rs 70,000 crore IPO of LIC will go ahead as planned despite the volatility and geopolitical tensions.

The insurance giant has filed draft papers for its share sale with the market regulator. The market is expecting approval by March 7-8 and public bidding will likely start by mid-March.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.