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This is not a runaway market: Quality stocks that fell in 6-8 months are up for grabs

A sharp decline in the crude price provided a much-needed boost to the Indian economy and aided the markets to retain lost value up to Rs 3.3 lakh crore during the fortnight.

November 24, 2018 / 08:13 AM IST
Dalal Street

Dalal Street

Rajeev Srivastava

After a sharp selloff in October 2018, domestic equity indices marked a decent recovery in the first fortnight of November 2018 mainly underpinned by a sharp decline in crude prices (20 percent down from the peak in October 2018) easing concerns over deteriorating twin deficits and stability in the Indian rupee.

Renewed buying from foreign institutional investors also helped in the rise of the Indian market with the Nifty 50 index and the BSE Sensex index rising 2.2 percent and 2.4 percent, respectively in the first fortnight of November 2018. But bears soon took control and pushed the Sensex below 35K and the Nifty below 10,600 levels.

A sharp decline in the crude price provided a much-needed boost to the Indian economy and aided the market to retain lost value up to Rs 3.3 lakh crore during the fortnight.

While the overall corporate performance has been slightly below expectation, and the street has already witnessed earnings cut in most of the sectors, the September 2019 quarterly corporate earnings have given a sense of confidence with positive management commentaries.

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In future, crude oil prices, rupee movement and the outcome of the upcoming state elections will dictate the trend in the domestic market.

While softening crude price and favourable consumer inflation data could see the Reserve Bank of India (RBI) defer the rate hike in its upcoming monetary policy, a possible rate hike by the Federal Reserve in December 2018 may put pressure on the Indian rupee, as further reduction in spreads of real interest rates may result in flight of hot money.

Nevertheless, we continue to advise investors to be careful in stock selection and take informed investment decisions particularly in light of political uncertainty, liquidity crises being faced especially by the MSMEs and the ongoing global trade war.

Retail investors should strictly venture this market through an advisor or invest through mutual funds. This is not a runaway market but quality stocks which are available at attractive valuations following sharp correction during the last 6-8 months can be accumulated at the current levels.

The market would be gripped with volatility and therefore, investors should be careful and invest in stocks of companies that generate free cash flows.

Disclaimer: The author is Head-Retail Broking at Reliance Securities. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol Contributor
first published: Nov 24, 2018 08:13 am

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