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Is This The Bottom Or More Pain Awaits? Here’s What Market Veterans Say

What should be the next move for investors? BQ asks market veterans.

A broker reacts while trading at a brokerage firm in Mumbai, India. (Photographer: Adeel Halim/Bloomberg News)
A broker reacts while trading at a brokerage firm in Mumbai, India. (Photographer: Adeel Halim/Bloomberg News)

Indian equity benchmarks fell the most since August 2015 today as they tracked the global markets roiled by oil’s historic plunge and coronavirus outbreak.

Investors lost more than Rs 7 lakh crore in market wealth as S&P BSE Sensex closed at 35,634, down by 5.17 percent; NSE Nifty 50 dropped nearly 5 percent to close at 10,443. Both the indices recorded the worst slide since Aug. 24, 2015.

The selloff left investors nervous, prompting them to unwind positions. That has brought both stocks and benchmark indices off their valuations at the beginning of the year.

Has the market reached its bottom? Is this a good time to buy? BloombergQuint spoke with market veterans.

Here’s what they said:

‘Better To Be Safe Than Sorry’

That is difficult to tell, Atul Suri, chief executive officer at Marathon Trends Advisory, told BloombergQuint in an interview. He would look for at least three days of stability before investing.

“These are situations which are a little outside the textbook. These are unknowns. So I'd rather be safe than sorry,” he said. “Yes I may miss a few hundred points from the base of a stock, but I’d rather be safe than sorry because in such times cash is king and whatever little you have, value it.”

  • Would Stay away from predicting a bottom given the high current volatility.
  • Markets in unchartered territory.
  • Bank Nifty is lead indicator of how markets pan out in India.
  • Turning point in markets will be performance of banking stocks.
  • Would stay away from predicting a bottom given the high current volatility.

‘It’s An Opportunity’

A Balasubramanian, chief executive officer at Aditya Birla Sun Life AMC, said it’s difficult to find a bottom to markets in such a situation. So investors should also consider deploying lump-sum amounts, he said.

“We normally advocate SIPs as the best way to invest, but having seen such a sharp fall, one must consider some lump-sum investments,” he said. “If someone has Rs 100 to invest, they should consider at least Rs 30-40 as lump-sum investments, rather than doing a SIP.”

The sharp fall in equities “essentially makes it an opportunity to buy at a stock or index level”.

After the 31 percent plunge in crude, he said that the “oil dynamic is changing more towards $30-40 kind of range”. “With oil price being so low, if the U.S. shale and gas goes out of business because of high costs, we could probably see a recessionary trend globally,” Subramanian said. “The global market is likely to keep sentiment low in general flows,” he said. And while the current selloff may lead to further stress on a global level, he said the Indian government can take steps to turn this into an opportunity for the economy.

The recent fall in commodity prices make a case for 50-basis-point cut in repo rate, he said. cut, “But I don't think they will do it immediately. They will look at doing this in the coming policy.”

‘Large Part Of The Damage Already Done’

Vikas Khemani, founder of Carnelian Capital Advisors, said it’s time to start “nibbling at equities”. No one can call the bottom but “large part of the damage is already is done”, he told BloombergQuint in an interview.

As “fear and panic” grips investors, lots of stocks which have no connection with the current crisis have been sold off, he pointed out. Khemani said private banks, which are largely protected from the coronavirus outbreak and plunge in oil price, look “interesting”.

Apart from financials, he expects consumption stocks to do well. “By and large, India remains well positioned.”

  • Developments over the last two to three days worrisome; could lead to protracted global slowdown.
  • If coronavirus slows down and normalcy returns in China, world economy and markets will get relief.
  • On the other hand, if coronavirus remains a crisis for longer, there could be quite a bit of financial damage.
  • Oil fall in the last two-three days is quite unprecedented.
  • Second and third order impact of such a selloff is never small.
  • Quite confident that this panic will settle down soon.
  • India at the margin, stands to benefit as it remains largely unaffected by the global slowdown.
  • If oil and commodity prices remain where they are, India stands to benefit.
  • India could also benefit from the supply-chain disruptions triggered by coronavirus.
  • Have to go through a painful and volatile period over the next couple of months.

‘Buy With Two To Three-Year Perspective’

Present condition gives investors an attractive opportunity to pick good stocks with a perspective of two-three years given that the fundamentals of the country remain strong, especially with a sharp fall in crude oil prices and the strength of the Indian currency, said Ravi Dharamshi, founder and managing director at ValueQuest Investment Advisors. “We are reaching the bottom of the economic and corporate profitability cycle.”

Dharamshi, however, expects pain in the global markets to continue for another quarter or two. But as China shows some positive signs, the world market will also chug along and return to normalcy if even 85 percent of the global supply chain returns to operations, he said.