Nifty50 tanks to 52-week low; should you be greedy or scared?

Thursday’s fall was the fifth consecutive decline for the market and the ninth such instance in the last 10 sessions

A Thursday that started with hope eventually ended with gloom on Dalal Street. Bears ran amok leaving many investors and traders looking for shelter but in vain.

The S&P BSE Sensex plunged to its 52-week low levels, and so did the relatively broader Nifty 50. As many as 17 stocks from Nifty traded close to or hit their respective 52-week lows. Hindalco, Tata Steel, Coal India, ONGC, and Tata Motors were among the biggest losers of the day - falling 5-7 percent. Nestle (India) was the only stock in the 30-share index that settled in the green.

Amid this gloom and doom, one pertinent question which is in everyone’s mind is – and perhaps how legendary investor Warren Buffett would pose it -- whether an investor should be scared or greedy? This simple question has perhaps no direct answer.

“An investor should be prudent. If your equity exposure is very high, offload profitable stocks, and if it is too low, time is ripe to buy equities, but very slowly as there could be more downside,” said Deepak Jasani of HDFC Securities, who declined to answer how much downside he expects.

Thursday’s fall was the fifth consecutive decline for the market and the ninth such instance in the last 10 sessions. Sensex has lost nearly 8 percent in these 10 sessions and investors have incurred a loss of Rs 20 lakh crore during the period.

The latest bout of selling can largely be attributed to Federal Reserve which went from cautiously hawkish to extremely hawkish within a few weeks. The central bank increased rates by 75 basis points in one go, the highest in nearly three decades. The culprit was unrestrained inflation.

Many believe this extreme hawkishness can also be imported to India, given inflation is also becoming a sore for the Reserve Bank of India. RBI has already increased repo rates – the rate at which it lends to banks – by 90 basis points since May.

“They are now in Operation Warp Speed and are not only shocking the markets but also are unable to convincingly guide on future expectations,” said Arvind Chari, CIO, Quantum Advisors. He believes near-term concerns dominate but stock market corrections will remain an opportunity to add to your long-term portfolio.

Amid this chaos, Vinod Nair of Geojit Financial Services also believes the market crash is an opportunity. He said it could be some last days of fall, especially if there is a resolution to the Ukraine problem and China reopens its ports and shops. There are indications but uncertainty remains, he said.

“It is high time to start SIP type investment in stocks for the next 2-6 months,” Nair said, adding, that if an investor is already invested, they can average slowly given they have idle funds.

Though he also hesitated to set a bottom for Nifty, he said going by the weekly data, 14,500 could be the worst-case level for the index. Though a lot will depend on FII flow, which is being dictated by happenings in their home country, Nair added.

Currently, Nifty is trading at a price to earnings of 19.1 times which is in the lower range of the last 5 years' average. Along with this, the Nifty Midcap 100 is trading at a price to earnings of 20.8 times which is in the lower range of the last 5 years.

“We believe that the market is in a consolidation zone now due to global as well as domestic issues but all the near negatives have been priced in the market at this point in time, valuations are attractive for the long-term investors,” said Yash Gupta- Equity Research Analyst, Angel One.