After almost 1,000 points rally in Sensex over the last month, experts now expect Indian equity markets to report sharp corrections in coming weeks. Calling domestic stock markets over priced, experts are certain that the bad IIP numbers would add pressure on the markets and expecting a gap down opening of the current week.
Disappointed by contraction in IIP to its nine month low of 1.9 per cent during February and widening of trade deficit to $ 10.5 billion, Jagdish Thakkar of Fortune Fiscal asked investors to get ready to witness a sharp correction in the stock markets on the short term. He further added, “With result season starting, markets would be extremely volatile for the coming weeks but on the longer term, things look quite promising and we expect the markets to perform.”
Urging investors to wait for the correction to finish before investing again, Thakkar added, “Markets are in a buoyant mood and so investors should wait for the correction phase to end and once consolidation starts, investors can again purchase. We expect outperformance from infrastructure, cement and capital goods sectors but investors should stay away from bank and automobile stocks as they can continue to trade under pressure.”
Despite a weak short term view, Puneet Kinra from Bonanza Portfolio pointed out that if high liquidity and sustained investment from foreign institutional investors (FII) might restrict the fall. As front line indices have already given a return of 12- 14 per cent, Kinra expects March quarter results and bad IIP data might dent the market sentiment. “Indian markets have been outperforming global peers and now are entering the overbought zone. We expect profit booking to put pressure on the markets unless FIIs continue to invest heavily,” he said.
While formulating a strategy for investors, he added, “long term investors should book partial profits on the current levels and hold the rest of the investments. We expect a sharp correction to start now but advice investors to buy on declines as the long term view still remain intact.” As a safe bet to invest in, he further added that investors should wait for quarter results to come and buy stocks of companies which post good financial performances in the market quarter.
Advising short term traders to avoid taking big risks, RK Global’s Rakesh Bansal suggests investors and traders to stay away from markets for now. He said, “Investors should not buy on current levels as a deep correction is expected. They should wait for the fall to finish and not rush in between to purchase stocks.”
Warning investors that the information technology (IT) sector would be the worst performing, Bansal added, “Over all we expect the markets would rise by the year end but investors should stay away from IT stocks. As a strategy, investors should buy on declines only.”
Unlike other analysts, Kunal Saraogi from Equity Rush holds a slightly different view on markets. Indeed he also expects a deep correction phase to start soon but also stresses that there might be plenty of opportunities for short term traders. He said, “While investors should avoid buying on higher levels, but intra-day traders can encash the market fall but should not hold stocks for large gains.”
As his advice for investors, he added, “long term investors should wait for markets to consolidate around lower levels before buying and should closely watch the quarterly results of the companies they plan to invest in. Avoid IT and bank stocks as they already have shown a strong rally and might come under pressure due to profit booking.”