Disappointed by the contraction in index of industrial production (IIP) and deceleration in export growth, analysts are now betting completely on the upcoming inflation numbers to provide direction to the range bound equity markets. Talking to The Pioneer, analysts said that the December inflation data would be critical of the markets and advised investors to forge their strategies keeping inflation numbers in mind.
Jagdish Thakkar of Fortune Fiscal stressed that markets would trade under pressure as bad IIP would have an impact on the stock markets. He said, “On the short term, we are expecting markets to continue in the correction phase. The selling might increase specially after the bad performance of IIP and exports. Investors should avoid buying in the preset scenario and should wait for the correction to get over. They should avoid investing on anticipation of markets bouncing back and should act only when there are clear sign of reversal.”
Expecting markets to remain volatile, Thakkar added, “The best strategy in the current situation would be to book profits on every opportunity. Also investors should be very careful while trading in banking shares as the fear of rising nonperforming assets would impact the stocks.”
RK Global Security’s Rakesh Bansal also expressed concerns for retail investors as the indices continue to trade with high volatility. He said, “Increase in market volatility has made me fearful as it generally signifies that either the markets to rally to new high of crash. We do not expect markets to make a new high hence think the correction in equities is far from over. If heavy profit booking continues, investors should be extremely cautious as markets to fall very quickly.”
While identifying sectors which investors should either avoid or focus on, Bansal said, “I sense Banking, infrastructure and midcap sectors are likely to underperform broader markets in short term whereas information technology, pharmaceutical and FMCG sectors are likely to outperform the markets.”
Kunal Saraogi from Equity Rush thinks that despite the correction in equities, long term investors will get plenty of opportunities to buy fundamentally sound stocks at reasonable prices. He said, “We expect the correction to continue but also think there will plenty of good stocks at repetitively cheaper rates for long term investors to buy. The volatility in the markets would be only on the shorter term and it is better to hold stocks for a longer term than engage in short term trading.”
Commenting on the upcoming inflation figures, Saraogi added, “Investors should keep a close watch on the upcoming inflation numbers as it would decide the direction of the markets on the shorter term. Short term traders should be extremely cautious while taking huge risks and should book profits rather than waiting for larger gains.”
Holding a similar view, Globe Capital’s Ravi Rastogi urged investors to widen their investment horizon and avoid markets on the shorter term. He said, “Markets are fundamentally weak and only suited for long term investments. Investors should opt for long term investments and avoid short term trading for now. Also, inflation data will be the key trigger for markets in the coming days. If inflation numbers rise, markets might react aggressively and crash. As far as volatility is concerned, markets to would continue to stay choppy till the general elections are over hence, investors should wait for the markets to correct and consolidate at lower levels before buying again.”