Buying opportunity for investors as Sensex, Nifty off 34% from record highs; 3 stocks set to rise up to 26%

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Updated: Apr 20, 2020 3:34 PM

Sensex and Nifty are 34 per cent off from their lifetime highs which can be seen as a buying opportunity for the investors. During previous bear phases of 1992 and 2008, Indian share markets vaulted up to 78 per cent in the following one year.

Sensex, Nifty, CEAT, NMDC, IOCThe brokerage and equity research firm’s study revealed that buying good companies post 70 per cent correction from their all-time highs and holding them for a period of one year generates supernormal returns of 60%

Indian share market witnessed a massive sell-off in March owing to economic fallout due to the fast-spreading of the novel coronavirus pandemic. In just a span of three months, BSE Sensex and Nifty 50 index have fallen around 65 per cent from their respective all-time record high levels to touch 52-week lows last month. Amid global equity rout and panic selling in March, foreign portfolio investors (FPIs) had withdrawn over a record Rs 1 lakh crore from the Indian markets. The pace of the total net outflows has slowed down in April, as so far FPIs have pulled out Rs 12,650 crore in this month. Currently, both the headline indices are 34 per cent off from their lifetime highs which can be seen as a buying opportunity for the investors.

During previous bear phases of 1992 and 2008, Indian share markets vaulted up to 78 per cent in the following one year. Sensex plummeted 56 per cent from all-time highs in 1992 and surged a whopping 78% in the next one year. During the global financial crisis of 2008 which was the worst and biggest credit crunch since the Great Depression of the 1930s. It tumbled 64 per cent. In the following year, markets staged a smart recovery and rocketed 75 per cent. “There are several instances and several stocks in reality, with historical precedents, that have corrected very sharply during times of panics but have, thereafter, rebounded very strongly when things improve or mend,” said ICICI Securities in its latest research note.

The brokerage and equity research firm’s study revealed that buying good companies post 70 per cent correction from their all-time highs and holding them for a period of one year generates supernormal returns of at least 60 per cent. ICICI Direct has recommended a few stocks that are likely to deliver returns up to 26 per cent once the new bull phase commences.

NMDC: NMDC share price hit a fresh 52-week low of Rs 62 apiece on BSE on March 13. Since then, the stock has gained around 26 per cent and is currently trading at Rs 78 apiece. The research and brokerage firm has recommended to ‘buy’ this stock with nearly 26 per cent upside. It has set a target price of Rs 101. “We believe the sharp decline has pushed the price to extremely oversold territory and expect a healthy base formation at long term support of Rs 60 in coming weeks as most negatives are already in the price,” ICICI Direct said in a report.

Indian Oil Corporation: IOC share price has risen over 15 per cent from its 52-week low of Rs 74.55 touched on March 30. The research and brokerage company, with a positive outlook on the stock, believes it to rally towards Rs 103, an upside of nearly 15 per cent. In the afternoon deals, IOCL shares were at Rs 88.20 per equity, up 2.56 per cent.

CEAT: CEAT has already surged over 35 per cent from its 52-week of Rs 601.50 apiece hit on March 24. The brokerage firm expects it to touch a target price of Rs 965, upside of 16 per cent. “We expect the stock to undergo a bottoming process over next few weeks which should be used to accumulate stock,” ICICI Direct said in a report. CEAT shares were trading at Rs 814 apiece on BSE.

(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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