Market may see more correction, time to buy quality stocks on dips, say experts

Indian equities continued reeling under selling pressure as the market benchmark Sensex fell more than 600 points and the Nifty slipped to 14,350 in the early trade on March 19. A sharp rise in Covid-19 cases in the country and rising US bond yields seem to have diminished the risk appetite of investors.

The market may see this phase of consolidation for some more time but investors should lap up this opportunity to buy quality stocks at a lower price, analysts said.

"Thankfully, the correction has brought down valuation to interesting levels in some of the pockets in the markets and this should bring buying interest back into equities sooner than later," said Gaurav Dua, SVP, Head - Capital Market Strategy, Sharekhan by BNP Paribas.

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Firming US bond yields have been a concern of late while a spike in coronavirus cases has added fuel to worries. The single-day COVID-19 count of Maharashtra breached the 25,000-mark on March 18. The numbers were the highest since the onset of the pandemic.

Total confirmed COVID-19 cases in India have risen to 1,15,14,331, according to the latest update from the Union Health Ministry. This number includes cases involving foreign nationals, patients who have recovered and the death toll.

The clubbing of IPOs in an already tight advance tax payment season also seems to have added to the underperformance of Indian markets compared to Asian and European markets, say experts.

"Indian market has been in a corrective phase for the past 10 days, due factors like high bond yields in the US, a slew of QIPs and IPOs taking away liquidity from the system and increased number of Covid cases being reported across the country," said Hemang Jani, Head Equity Strategy, Broking & Distribution, Motilal Oswal Financial Services.

The short-term trend for the Nifty continues to be weak. Experts point out that the Nifty is placed at the lower support of 14,500, so one needs to be cautious for any upside bounce.

"A decisive move below 14,500 levels is likely to open broad-based weakness in the market and in such a scenario, the Nifty could test 14,000 levels in the next week," said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities, said technically, the index still maintains lower high and lower low series, which suggests medium-term weakness. However, on intraday charts, the index is in the oversold zone and is expected to trade near 50-day SMA for the next few trading sessions at 14,750 that would be sacrosanct.

Deven Choksey of KRChoksey told CNBC-TV18 that the majority of funds are noticing strong dollar and rising bond yields. "As a result, their allocation of money is either held back or pulled back because of this, we are seeing a selloff in the market. This correction in the price is the welcome correction from the investment point of view," he said.

On similar lines, Mohit Ralhan, Managing Partner and Chief Investment Officer, TIW Private Equity, said the structural trend of strong economic recovery and growth remains intact, which is the most crucial parameter for a long-term investor.

Now, the quarterly earnings season, which will begin in the first week of April, will offer a fresh trigger to the market.

"The market may remain dull in the near-term but once the Q4 earning previews start flowing in, there would be a renewed interest by market participants," said Jani.

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