The S&P BSE Sensex lost nearly 2000 points in a matter just 6 trading session weighed down by global factors and on the domestic front higher fiscal deficit and imposition of long-term capital gains tax (LTCG) of 10 percent in Budget 2018 weighed on sentiment.
The long-term trend still remains on the upside and investors should use dips to buy into quality stocks and stay away from high PE stocks or stocks with a higher beta.
The near-term trend got disrupted led by a global selloff in equities but analysts see this as a golden opportunity for long-term investors to buy into quality instead of looking at liquidating their positions.
Following the downfall, the total market capitalisation of BSE listed companies eroded by Rs 10 lakh crore to Rs 1,45,22,830 crore in just six trading sessions.
The market capitalization of BSE listed companies stood at Rs 155,25,363.94 as on 25 January which plunged to Rs 145,22,830 crore as on 6th February 2018.
Hopes of a short-term reversal have arisen the way indices rallied towards the close of the trade for the second consecutive day in a row. The index closed off from day’s low which suggests that a bottom is now in place – the next big question is – what should investors do?
Should investors sit tight and let the market volatility settles down, or start buying on a dip or the other thing which investors’ could do is to sell on rallies?
The word from analysts’ remain mixed as to what traders should do at current levels but there is one common theme which has come out. Most analysts’ suggest investors to start accumulating quality stocks on declines with an investment horizon of 12-24 months.
"If an investor has surplus funds and has a time frame of more than 12-24 months, this is the time to increase the allocation to equities, as there is a meaningful correction in the market after a long time," Hemang Jani, Head - Advisory, Sharekhan told Moneycontrol.
"We see this as an opportunity for retail investors, as this is happening at a time when earnings growth revival is seen across companies after a gap of almost 3 years. Some of the companies like Maruti, Escorts, HDFC, HDFC Bank, L&T, JSW Steel that have reported good numbers this quarter and has upside potential of giving over 15 percent return," he said.
We spoke to various experts and here’s what they have to recommend after Tuesday’s fall:
Kunal Saraogi, CEO, Equityrush.com: Sit Tight!
The uptrend of the last 1 year stands disrupted by the fall of the last few days and therefore more weakness seems to be in the offing in the short term. The long-term trends, however, remain intact despite the sharp fall.
What it means is that long-term investors need to remain invested and look for buying opportunities if the fall deepens while shorter-term traders must be short on the markets given that Nifty trades at important supports.
Contrary to what we might want to see happen, markets may take a bit longer this time to regain lost ground, therefore, traders need to be patient and cautious.
Ritesh Ashar – Chief Strategy Officer at KIFS Trade Capital: Sit Right!
Sit tight with cash is what we suggest. Let market stabilize and discount all the factors which led to a huge sell-off. This fall can be capitalized to buy some quality stocks available at cheap valuations. Time to build a portfolio for those who missed the rally of 2017.
Shubham Agarwal, CEO & Head of Research at Quantsapp: Buy on Dips!
Investors should act as Opportunist. The rule of the stock market is to Buy low and Sell high but corrections create panic and the ‘Fear’ overrides the fact to visualize an Opportunity. The Nifty jumped 36 percent from beginning of 2017 to the interim high of 11170 and has corrected 7 percent since then. It’s not the ‘Returns’ which is in a panic instead ‘Leverage’ is the culprit.
Investors make money by remaining invested in the market and not by staying out and such corrections within the overall bull market is an opportunity. Bull market corrections are generally steep and V-shaped which means the decision has to be made quickly.
The recommended strategy for investors with a medium to long-term perspective would be to Buy in a scattered manner in every 5% correction or with a strategy of a hedge to limit downside.
Pushkaraj Sham Kanitkar, AVP - Technical Research at GEPL Capital: SELL on Rallies!
Time to sell on rallies. We feel this correction may extend for a few weeks if not more. Would be worthwhile to sell on the rise, as prices would some way fall back to rational valuations. It would be a slow drift and once should wait for the bottom to be formed first.
Hemang Jani, Head - Advisory, Sharekhan: Buy on dips!
If an investor has surplus funds and has a time frame of more than 12-24 months, this is the right time to increase allocation to equities as there is a meaningful correction in the market after a long time.
We see this as an opportunity for retail investors, as this is happening at a time when earnings growth revival is seen across companies after a gap of almost 3 years.