Good time to fish. (Photographer: Dimas Ardian/Bloomberg)

Market Close To Bottom, Hunt For Quality Stocks, Say Veterans

The selloff in Indian equities worsened after fresh concerns around the U.S.-China trade war and rising interest rates triggered S&P 500 Index’s worst drop in seven months.

The S&P BSE Sensex wiped out its yearly gains as the index dropped 2.5 percent in early trade and the NSE Nifty 50 Index slipped well below its key support level of 10,300. Non-banking financial companies—Indiabulls Housing Finance Ltd. and Bajaj Finserv Ltd.—contributed the most to the decline.

Market Close To Bottom, Hunt For Quality Stocks, Say Veterans

Basant Maheshwari, who heads the namesake wealth advisory firm, sees the next big support for Nifty at 10,000. “We believe that the damage has been done and the same is reflecting in the price. We don’t see any small-cap stocks becoming a large cap for now.”

The Nifty, trading at 10,273 at 2:00 p.m., has fallen over 13 percent from its August peak because of as higher crude prices and a weakening rupee threaten to balloon widen the trade and current account deficits. That was aggravated by a liquidity crunch for non-bank lenders after defaults by Infrastructure Leasing & Financial Services Ltd. The latest selloff comes amid fears of capital outflows with the U.S. Federal Reserve expected to continue increasing rates. Foreign investors have already pulled out more than Rs 80,000 crore from both debt and equity markets in India.

Market Close To Bottom, Hunt For Quality Stocks, Say Veterans

But the 9,500-10,000 level for Nifty will be challenging to break on the lower side, according to N Jayakumar, managing director at Prime Securities. “I will be surprised if Nifty goes significantly below 9,800.”

About 60 percent of the stocks are quoting at 50 percent lower from their all-time highs, he said in an interaction with BloombergQuint. “With the current market scenario, I think this is a great time for bottom-fishing in the markets.”

Jayakumar remains bullish on the aviation, public sector banks and pharmaceuticals. “The top two or three pharmaceutical companies and PSU banks could give you surprise upside returns from current levels, while the airports and its ancillary industries are expected to grow in the next two to three years.”

That’s why A Balasubramanian, chief executive officer at Birla Sun Life AMC, suggests looking at stocks with growth opportunities. “As mid- and small-cap stocks have corrected more, it’s time to look at stocks that have good growth opportunity.”

Ajay Shrivastava of Dimensions Consulting expects the calm to return soon. “There will be more correction and another 2-3 percent will not bother anybody,” he told BloombergQuint in a phone interview. “We will have more peaceful times ahead considering a broader view.”

Watch | N Jayakumar on market turmoil and what’s next for Indian equities