Sensex, Nifty Tumble: Here's What Market Experts Make Of The Plunge
Even as Indian equities tumble, market experts BloombergQuint spoke with said the decline presents an opportunity to buy.
The S&P BSE Sensex and Nifty50 plunged more than 3% intraday on Monday, before recouping some losses to close 2% lower. The benchmarks have retreated from all-time highs on valuation concerns, aggravated by the spread of the Omicron variant of Covid-19. The Sensex and the Nifty are now about 10% below the October peak.
Here's what the market participants have to say about the decline:
Reasonable Economic Data To Help Absorb Fall
Manish Gunwani, chief investment officer, equity Investments, Nippon India Mutual Fund
Don’t think these are conditions like 2007 where you can say that global GDP has run up so strongly that you’re expecting a big crack. If Omicron turns out to be a three-sigma event, nothing can be ruled out in that sense. This looks theoretically more like May 2006 correction where there was fear of Fed tightening, the global economy was doing well, and we had a very sharp correction based on liquidity fears. But on the other side, if we come out with very reasonable economic data, then we will be able to absorb this.
We have seen the midcap index up 40% this calendar year, so 4-5% correction should not really matter in the long run.
Deep Correction in A Multi-Year Bull Market
Dipan Mehta, whole-time director, Elixir Capital
The bull market that started around March 2020 never had any serious correction and a lot of froth was building up. So a shakeout was imminent. Actually, the markets started correcting even before the bad news came in the form of the Omicron variant and the Fed and the RBI policies. In a way, the markets were correcting and then the bad news followed.
Also, the last earnings season was not a good one. Although the top line of many companies had gone up, the profit margins were hit very badly due to higher input costs. What you had was all the negative factors culminating into this kind of a loss.
But it's nothing to worry about. This happens in a bull market all the time. It's a deep correction in a multi-year bull market.
Mahesh Nandurkar, equity/macro strategist, Jefferies
In a recent interview, Nandurkar said India will remain "a buy-on-dips kind of market because of recent global central bank events... would look to begin to buy selectively into some of our favoured cyclical names."
Will not be seeing any big jumps in CY22 on the headline market front. Markets may hit new highs in CY22 but that is still not calling for a big upside. One will have to be selective in terms of sectors and stocks.
See very strong economic tailwinds already entered as a phase of supercycle like 2004-10. Various macro indicators are pointing towards that phase this time around.
Bullish On I.T., Pharma And Select Chemical Stocks
G Chokkalingam, Founder & MD, Equinomics Research & Advisory
The markets will start stabilising by January. So far, Omicron is not proved to be leading to lot of deaths. Even if it is going to cause some illness, emerging markets cannot afford to lockdown seriously. We don't have the ability to keep announcing lockdowns and stimulus. Smaller countries like the Netherlands can afford to do that.
The Indian economic story remains very strong. Correction is also healthy. Another important aspect is the new investors. Every day, more than one lakh new investors are coming to the market.
Whenever the virus issue takes upper hand, it is anti-inflationary. I am bullish on small and mid caps though one has to be selective. The new investors are going to focus on small and mid caps as they look to make quick money. There are many stocks in the category still trading at pre-pandemic levels. On a sectoral basis, I remain bullish on information technology, pharma in the short term and select chemical stocks and companies with land assets.
Technical Indicators Suggest A Volatile Movement
Vijay Dhanotiya, Lead of Technical Research, CapitalVia Global Research
The market witnessed the continuation of correction as Nifty falls below a crucial level of 16,800. Market research suggests that 16,400 is an important support level for Nifty. If the market is unable to sustain that as well, we might see the correction to continue further till the level of 16,000. The traders are advised to refrain from building a fresh buying position, until we see improvement. Technical indicators suggest a volatile movement in the market.
These Kind Of Corrections Have A Shorter Duration
Deven Choksey, managing director, KRChoksey Investment Managers
The world over, markets are having sharp corrections and sharp rallies. This is a typical characteristic of easy money and tight liquidity. This kind of correction brings down the prices and the fall in the prices will be extremely sharp. Interestingly, these kind of corrections also have a shorter lifetime.
Currently, the withdrawals that are happening in the global system are of leveraged positions. The withdrawals fall in line with what the Federal Reserve has indicated about rate hikes and also because we are at the yearend where most of the credit funds tend to carry back cash home. There's also uncertainty that has emerged from the Omicron variant. As a reason, people will demand liquidity in their hands.
We think the withdrawals are not permanent, they are transitory in nature. Another reason why I am feeling confident is probably for India is the time of the corporate and economy cycle, where demand is extremely strong and buoyant.