Indian market made an intermediate top last Tuesday when Nifty made a record high of 10,178 and Sensex touched 32,500 but since then benchmark indices have lost more than 4 percent each in a matter of just 7 days.
Investor wealth saw an erosion of over Rs 6 lakh crore on the BSE in the past seven trading session dragged down by massive selling in the stock market where the S&P BSE Sensex tumbled by as much as 1,340 points.
The Nifty plunged as much as 443 points from its record high of 10,178 recorded on 19 September to 9,735 on September 27, a level last seen on 11 August.
Rising geopolitical uncertainty, weakening rupee, concerns over India’s growth story, fiscal slippage, as well as muted earnings seen for the quarter ended September gave enough reasons to investors to book profits.
“I think not only rising tension between the US and North Korea dragged down the market but also, weakness in Indian Rupee (slumped to near six months low due to foreign fund outflows on concerns of fiscal deficit), rising crude price which jumped near two-year high, coupled with geopolitical concerns and US Federal Reserve’s plan to reduce its balance sheet bothered investors,” Sanjeev Jain, AVP - Equity Research at Ashika Stock Broking Ltd told Moneycontrol.
As many as 20 stocks from the S&P BSE 500 index slipped up to 30 percent from 8th September when breakout happened and Nifty touched a record high of 10,178.
Supertrend indicator gave a buy on Nifty on 11th September while for Sensex it gave a buy on 12th September. But, soon the momentum fizzled out and Supertrend indicator gave a sell on 25th September.
Stocks which came under pressure includes names like JP Associates, Central Bank, 8K Miles, Jet Airways, Interglobe Aviation, Shree Renuka Sugars, Infibeam, Videocon Industries, HDIL, Indo Count Industries etc. among others.
The fall was broad-based as most small and midcap index witnessed massive fall of up to 30 percent in the same period. Investors are advised to tread with caution and not every stock which corrected is a good buy.
In the S&P Smallcap index stocks which slipped up to 30 percent include names like Sri Adhikari Brothers, Virtual Global, JP Associates, Shilpi Cable, Andhra Cement, Gammon Infra, IOL Chemicals, Mercator, Diamond Power etc. among others.
High beta names in the mid & smallcap stocks faced the brunt of massive selling by foreign institutional investors which have offloaded over Rs 17000 crores in Indian equity markets as per provisional figures.
The domestic institutional investors kept the slide in equity markets under check as they bought nearly Rs 14000 crores in the same period.
“From last seven consecutive trading session, midcap and smallcap indices fallen by 5.6% and 6.2% respectively. There are a number of good midcap companies, which have also fallen with the flow,” said Jain.
He further added that investors may take this laggard as an opportunity to invest for long term. The companies which sound fundamental and future prospect looks bright may be a pick at these levels.