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Last Updated : Jun 28, 2017 10:31 AM IST | Source: Moneycontrol.com

Market could slip by up to 5%, but opportunity for investors to buy quality stocks

The S&P BSE Sensex rose nearly 17 percent while some of the stocks have already more than doubled investors’ wealth in the same period.


The S&P BSE Sensex which rose to a fresh record high just last week broke below 31,000 while the Nifty was seen flirting with its crucial support level of 9,500 just ahead of June expiry.

The index has started forming the lower top and lower bottoms which are a bearish sign. Traders might have to brace for some more volatility but it is a golden opportunity for investors to buy into quality stocks as the correction could well extend up to 5 percent, suggest experts.

“We are seeing signs of fatigue in the Indian market currently and the correction has just started. The last time I was here, I said that we could see a correction of up to 5 percent in indices but the pain will be felt below that,” Andrew Holland, CEO, Avendus Capital said in an interview with CNBC-TV18.

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“We have to look forward to GST and the disruptions that it will cause. We expect some more downside in domestic and global markets in the next few months,” he said.

The S&P BSE Sensex rose nearly 17 percent while some of the stocks have already more than doubled investors’ wealth in the same period.

The quick surge in benchmark indices and select stock pushed the valuation higher which were now trading slightly above their long-term averages. However, there is another reason which is pulling the market own and that is the implementation of the goods & services tax (GST). The GST will come into effect on July 1.

“In the short term, I am little cautious about is GST which will be lot messier than many of us have feared. There could be several months of major dislocation in terms of companies managing and stretched out payments,” Arvind Sanger, Managing Partner, Geosphere Capital Management said in an interview with CNBC-TV18.

Although the Street has factored in some of the disruptions, the full impact is not in the price yet. The implementation would not push the timeline of earnings to recover by at least two quarters.

“Inherently it is the stretched valuations due to which the market is facing selling pressure, but GST would be one of the hooks that the market will justify for correction to set in,” Jimeet Modi, CEO, SAMCO Securities told Moneycontrol.

The halting trade on Tuesday resulted in a breakdown on charts for Nifty50 as it slipped below its crucial support placed at 9500, signaling a caution ride ahead.

After reaching a peak at 9700 level during the previous trading period, the bearish trajectory at the current level is more rational than to cohere the breakout at the upper level, suggest experts.

“The short-term turmoil which is expected to witness during the transition phase of GST has been a catalyst for the market to discount given the valuation concern,” Dinesh Rohira, Founder & CEO, 5nance.com told Moneycontrol.

Given the valuation concern during the past months, the market is now pricing according to the expectation from this transitional phase to be witnessed from 1st July.

“For investor having a long-term objective, this will be a better time to buy quality stock on every dip. But when you examine quality the of stocks, it should be stretched on few important parameters such as past revenue trend along with future outlook, the volume of business & its geographical presents, debt structure and finally a fundamental outlook of industry,” said Rohira.

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First Published on Jun 28, 2017 10:31 am
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