After a sharp rally to record highs, Indian stock markets have come under immense pressure due to heavy profit booking triggered by the high inflation numbers for November.
Going ahead analysts see this pressure continuing as the Reserve Bank of India (RBI) in its monetary policy on December 18 might announce a rate hike in order to curb rising inflation.
Talking to The Pioneer, analysts expressed concerns for interest sensitive sectors and said that in the near future, stock markets could be extremely volatile and advised investors to be careful while trading. Jagdish Thakar from Fortune Fiscal said, “Correction in markets will continue as all eyes would be on the RBI’s policy and so investors should book profits on every opportunity they get. Investors should try and stay away from capital goods, banking, infrastructure, real estate and automobile shares because they would be hurt the most if RBI decides to increase rates. As far as on the longer term, Indian markets still hold a lot of potential and once the correction is over, investors can re- enter the markets again.”
Fear of a rate hike has already dented the markets and RK Global Security’s Rakesh Bansal expects the correction to continue until the monetary policy is officially announced. He said, “Stocks markets are at critical levels and if after the policy, there are signs of a bounce back, we expect the rally to resume again. But if markets continue to fall, the correction can be deep and investors should book profits and wait. Investors should trade with the flow of the markets and avoid taking huge risks. Also, they should plan their trades keeping the RBI policy in mind or else wait for the market volatility to settle before taking any positions.”
Kunal Saraogi from Equity Rush also advises investors to closely watch RBI’s December monetary policy and then take decisions for future investments in the markets. While advising investors to avoid rate sensitive stocks, he said, “Going forward, markets look extremely weak and volatile. Investors should avoid rate sensitive sectors as they might see heavy selling in the coming few days. Investors should trade with caution and book profits on the first opportunity and not wait for larger gains. It is best to stay out of markets till the situation settles down. If RBI does not make any changes in the rates, then there is a huge possibility that markets might bounce back.”
While most analysts feel RBI might announce a rate hike in the upcoming policy, Ashok Agarwal from Escorts Securities holds a completely opposite view. While advising investors to be careful he said, “long term view of the Indian markets still looks strong though there will be a lot of pressure on the short term. In the short term, correction might continue as all eyes are set on the whole sale price index (WPI) inflation and after that on RBI policy. It is best for investors to wait for all these news events to pass. Once the correction is over and market volatility eases down, invest in beaten down stocks which have sound balance sheets and are fundamentally strong.”