Even as the market opened on a positive note on Monday thanks to a fall in crude oil prices over the last couple of days, buying was not enough to keep the indices in the green. Investors remained cautious on equities given rising risks of recession and inflation.
Most analysts feel selling in the market is far from over. In the face of bears’ onslaught, even 15,000 level on Nifty may not be sacrosanct. The index may fall even below 14000 level, according to some projections.
“Based on current assessment, we can expect another 5 to 10 per cent correction in the main indices giving a range of 13,750 to 14,500 for Nifty50,” said Vinod Nair, head of research at Geojit Financial Services. “This is not the best time to be greedy but being smart and rational by investing a larger than regular amount on a consistent basis over the next 3 to 9 months, with a view that the worst will be factored in.”
Market has suffered heavily after central banks across the world turned extremely hawkish given the surging inflation which is likely to suck liquidity and lead to recession in some of the largest economies.
Nomura Group over the weekend said US Fed’s commitment to restoring price stability will likely push the world’s largest economy into a downturn and a mild recession might begin. If this materialises, many Indian companies and the economy will also feel the impact.
“Developed economies are closing asset purchase programmes -- along with the Fed rate hike – that clearly states that the developed world is sliding into recession. It will trigger FII (foreign institutional investor) outflow from India, which will depreciate the rupee and will make the imports costlier and increase the CPI (consumer price index) inflation,” said Vinit Bolinjkar, head of research, Ventura Securities.
He explained that higher inflation will result in more rate hikes, which will impact corporate earnings. The rate hike will also likely reduce the demand for automotive and real estate sectors, where more than 80 per cent of purchase happens through credit.
The impact of rate hikes is already visible in some auto and realty stocks. Consumer discretionary stocks have also taken a beating as investors believe they will not be negatively impacted in the face of rising inflation and rate hikes.
Thus, Bolinjkar took a bearish view on the market for the medium term and said higher inflation and lower demand are likely to impact economic performance which will further affect the stock market, so we can expect a flat or a bear market for more than 15-18 months.
He advised investors that instead of putting all their money in one go, they should accumulate fundamentally sound stocks in instalments. Companies with very high debt on their balance sheet should be avoided, he added.
Since hitting an all-time high of 18,604.45 last year, the Nifty has fallen 18 per cent to close to 15,200 level, which is near its 52 week low level. The 30 share flagship BSE Sensex is also trading near 13 month low levels. Indices declined over 5.5 percent last week to log the worst week since May 2020.
“Choppy movement in broader market is expected,” said Akhilesh Jat, category manager - equity research, Capitalvia Global Research. “The near-term market trend is weak and there is a high possibility that the Nifty could breach the level of 15,000 as well in the near term.”
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