Investors should understand that it is not that businesses are doing bad or there is something extremely wrong with the economy to cause such a huge fall over the last few trading sessions, Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor, said in an interview with Moneycontrol’s Kshitij Anand
It is very likely that the Nifty50 could well recover from here and not plunge further to lower levels, he added.
Edited excerpt:
Q. Lower circuit on March 13 and then some recovery on bourses. What is the way ahead for markets in the near term? A. The lower circuit on March 13 was imposed when markets came down 10 percent from the previous close. However, after hitting the circuit, value buying came into the market which led to its recovery along with strong global cues.
The near-term looks promising in the market, investors must watch out for the levels of 9,800 which will be a crucial support and 10,500 will act as a resistance in the short-term.
Q. Sensex and Nifty are officially in the bear market along with their global peers. Historical data suggests that Nifty witnessed a fall of 25-28 percent before bouncing back. Do you think this time as well, the downside is fairly limited from here?
A. Nifty and Sensex have fallen 22-25 percent approximately from their respective record highs, and therefore, by seeing historical patterns and sharp recovery in the March 13 session, it is only fair to assume that recovery can be seen.
This downfall was in response to the negative global sentiment and panic after Coronavirus was declared a pandemic.
Investors should understand that it is not that businesses’ are doing bad or there is something extremely wrong with the economy to cause such a huge fall over the last few trading sessions.
It is very likely that the Nifty50 could well recover from here and not plunge further to lower levels.
Q. What does your experience of bear markets tell you — time to catch the fear? Investors who put in money around the time the market hit lower circuit, say 2008, have created massive wealth over a period of time. Do you think we are in a similar situation?
A. Between May 2008 and February 2009, the S&P 500 lost nearly half of its value. In the following five years, it gained more than 153 percent.
Any investor who has entered the market during the above period would have received decent profits at attractive valuations.
The lower circuit in the Indian markets was triggered, for the first time in 12 years, on March 13, 2020 since the 2008 global financial crisis.
After the trading was halted, following a circuit breaker within five minutes of trade, Sensex and Nifty made recoveries in their days' losses, which was the biggest intraday recovery by the markets.
Fall in the Indian indices has been lower than the stock market in other countries. This is a good time to begin accumulating stocks as valuations are fairly attractive now.
The situation is not similar to the 2008 crisis as then, it was due to the liquidity crisis across the globe and the current decline in capital markets is due to negative sentiments of the investors. In situations like this, recovery is usually very fast as people are selling emotionally.
Q. What are you suggesting to your clients — sit tight or buy in a staggered way?
A. Investors should consider investing in a staggered manner rather than investing their entire capital in a single stock or sector. This would help them diversify their risk as well as maximize their returns in case of uncertainty. People can consider investing across various sectors or benchmark indices as per convenience.
Q. The good news is that mutual funds are still receiving inflows which means that investors still trust equities despite massive selloff. Do you think the trend will continue or you see redemption pressure in MF sooner or later?
A. This increased inflow, especially from DIIs, points to one thing and that is their consistent faith of investors in equities, despite massive selloff investors are seeing an opportunity for value buying.
Investors who have made value buying are not ones with short term views or goals, these investors will hold their investment for the long-term and it is unlikely that the majority of investors will try to redeem their MF units in near future.
Q. Where is the value in this market? Most of the stocks are available at multi-year lows. How should investors decide which one is a better value play?
A. It can be observed that most of the stocks have touched their multi-year lows this week and are trading below their 200-Days EMA.
The current decline in capital markets is due to the negative sentiments of the investors and has nothing to do with the financial performance of most of the stocks.
In such a situation, investors should be careful in choosing the stocks before investing.
Analysing the fundamentals as well as the future projects of the firm would help apart from considering the technical aspects. Consumption stocks will give the opportunity for value buying.
Q. Any five stocks which you like to recommend to your readers and why?
A. Here is a list of top five stocks which investors can look at buying after the recent fall:
HDFC Bank: Buy | LTP: Rs 1,071 | Target: Rs 1,170 | Stop Loss: Rs 999 | Upside 9%
HDFC Bank Ltd holds a weightage of around 10 percent in the Nifty 50. The stock gained more than 4 percent after the trading was halted on March 13
It also has a gap on the upper side. Technical indicators signal a reversal in this stock. We recommend buying the stock above Rs 1082 with a stop loss of 999 and a target of Rs 1170.
ACC Ltd: Buy| LTP: Rs 1,180 | Target: Rs 1,295 | Stop Loss: Rs 1,080 | Upside 10%
Overall trend of ACC Limited is bullish. The stock has formed a bullish engulfing pattern on its daily charts. We recommend buying the stock above 1,185 with a stop loss of Rs 1,080 and a target of Rs 1,295.
Rallis India Limited: Buy | LTP: Rs 209 | Target: Rs 229 | Stop Loss: Rs 205 | Upside 9.5%
Rallis India Limited has gained more than 5 percent after the trading was been halted on March 13. The stock is trading above its 100 and 200-Days EMA. We recommend buying the stock above Rs 215 with a stop loss of Rs 205 and a target of Rs 229.
Divi's Laboratories Ltd: Buy | LTP: Rs 1,954 | Target: Rs 2,235 | Stop Loss: Rs 1,829 | Upside 14%
The overall trend of Divi's Laboratories Limited is bullish. The stock is trading above its 100 and 200-Days EMA. We recommend buying the stock above Rs 2030 with a stop loss of Rs 1,829 and a target of Rs 2,235.
HDFC AMC: Buy | LTP: Rs 2,686 | Target: Rs 3,050 | Stop Loss: Rs 2,650 | Upside 14%
The stock has rebounded from its important exponential moving average on the weekly charts and it is now showing signs of a reversal. We recommend buying the stock above Rs 2,800 with a stop loss of Rs 2,650 and a target of Rs 3,050.
Q. Is it a bad deal for shareholders of Yes Bank? What should investors who are invested in Kotak, HDFC, SBI and Axis Bank do?
A. The infusion of nearly Rs 3,100 crores of funds in Yes Bank is a positive sign and it is a fair deal for shareholders of Yes Bank as the bank will be able to resume operations much more effectively and with other noteworthy banks as its shareholders.
These banks can always monitor the business and take care of it in case of any deviation from standards. For investors, who are invested in Kotak, HDFC, SBI and Axis bank this decision may generate mixed feelings.
This may be beneficial in the long run as equity invested in Yes Bank will also appreciate as the investment value of these investors will also rise and hence increasing the value.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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