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Last Updated : Mar 17, 2020 12:27 PM IST | Source: Moneycontrol.com

Volatility to continue but market may have bottomed out, say experts

Brokerages and experts are almost unanimous that the market is near its bottom and is at a level that has made investment attractive.

The year 2020 has hit the Indian market with a force of unforeseeable events, especially the coronavirus outbreak that has roiled shares across the world and has put the global economy in a spot.

From geopolitical tensions to coronavirus, investors have suffered losses since January. Indian market benchmarks the Sensex and the Nifty that found new highs in January have since sunk to what is increasingly looking like an abyss.

As of March 16 close, the Sensex was 10,884 and the Nifty 3,233 points down from their best performance.

Close

Though governments and central banks across the globe have announced measures to ensure economic stability, the possibility of a respite is remote till the virus that has now spread to almost 150 countries after emerging in China late last year is controlled.

India reported its third coronavirus death on March 17 and has so far confirmed 125 cases. The global death toll is close to 6,000 and the number of infections has risen to 182, 611.

Volatility to continue

India's volatility index India VIX has jumped over 400 percent in 2020, so far.

Higher volatility could keep the market and traders under pressure for some more time till the index climbs down from its decade-high peak.

"The market is pricing in uncertainty and the uncertainty will continue till the core issue, which is what we can do about the coronavirus, is not addressed," said Somnath Mukherjee, Managing Partner and Head: Investment Advisory and Strategy, Products and International Business, ASK Wealth Advisors.

Eventually, when the global markets stabilise and coronavirus cases show a significant drop, volatility will subside and the market will start moving upward.

Turnaround coming?

They say the darkest hour is just before dawn.

Anecdotal data suggests that usually declines in the index have not gone further than 25-28 percent, hence a recovery could be in sight.

The last time when Nifty50 was in the bear phase in 2015, it took around two years for the index to claw out of it.

Brokerages and experts are almost unanimous that the market is near its bottom and is at a level that has made investment attractive.

"We think such panic bottoms are a great opportunity to buy quality stocks. The near-term bounces will keep on happening but eventually, volatility will subside and markets will give opportunities to ‘accumulate’. For investors, this is a buy-on-dips opportunity," said Umesh Mehta, Head of Research, Samco Securities.

In a report on March 16, brokerage firm Spark Capital said one should not risk missing out on the potential rewards at this juncture.

"We recommend investors to capitalise on the capitulation, endure the pain at this last stage of the down-cycle and to stretch the horizon to visualise beyond what is apparent, but do not risk missing out on the potential rewards," it said.

Be prudent and selective

Cheaper valuation does make the market attractive but investors must refrain from reckless buying, say experts.

"One shouldn’t try to catch a falling knife all at once. Similarly, let the markets settle down before buying value. It is in such times that the courageous step in but at the same time, not all buying needs to happen all at once," said Amar Deo Singh, Head Advisory, Angel Broking.

Brokerage firm Emkay Global said it is unwise to jump in with broad-based buying after the recent market correction.

Emkay advises focussing on quality stocks that are trading at a deep discount, where the direct impact of a global economic slowdown or a large outbreak of coronavirus in India is relatively low and have low promoter pledging of shares.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Mar 17, 2020 12:27 pm
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