BSE Sensex and NSE Nifty 50 fell to their fresh 52-week lows on Thursday, as bears wreaked havoc after the US Federal Reserve increased interest rates by 75 basis points, the biggest rate hike since 1994. Amid downfall, Nifty has breached the crucial support zone around 15650 levels i.e. March 2022 low, the next major support exists around 14,800-15,000 zone, Ajit Mishra, VP-Research, Religare Broking, told Surbhi Jain of FinancialExpress.com. Broader indices have also slumped sharply and several stocks were trading in extreme oversold territory. Even as LIC (Life Insurance Corporation of India) share price has crashed 30 per cent from IPO price, Mishra still recommends investors to hold the stock. On the crude oil prices front, Ajit Mishra expects a $130/bbl mark on the higher side and stepping ahead, believes that $140/bbl mark could be seen as the next juncture for Brent oil. Here are edited excerpts from the interview.
1. What should one do with LIC stock, hold or ride out the volatility?
We recommend investors to hold the stock. Currently, the selling pressure is widespread and the majority of sectors & stocks are feeling the heat. However, the steps taken by the government to ease the inflation combined with the monetary policy actions by the RBI would improve the scenario in the coming quarters.
2. Why are crude oil and energy prices going higher? Where do you see crude oil prices in the near to medium term?
Energy prices have remained buoyant amid concerns about supply tightness, while the demand has been robust from the US due to the peak summer driving season, fuelling oil prices higher. Western sanctions on Russian oil have been a critical factor that has restricted major supply in the market from one of the largest energy exporters in the world. Self-sanctions by various buyers are further leading to supply shortages. Meanwhile, oil production from OPEC and the US has not been enough to offset the loss of production from Russia. Additionally, expectations of a recovery in demand from the second-largest oil consumer, China have boosted the sentiments. Though there are concerns that aggressive rate hikes by the US would suppress oil demand, the near-term outlook for oil prices is still positive, where we can expect $130/bbl mark on the higher side and stepping ahead, a $140/bbl mark could be seen as the next juncture for Brent oil. On the other hand, the $110-107/bbl zone could be seen as the immediate floor for prices.
3. Should investors continue investing amid this stock market fall? Where do you spot opportunities?
Investors should maintain a “bottom-up” approach and gradually accumulate stocks with the long term view. They may consider sectors like banking, auto and select stocks from the IT pack for fresh buying.
4. Equity markets oversold now or there is still downside risk?
The decline in the benchmark has been gradual in the last eight months as it spends some time under consolidation or witnesses intermediate rebounds before a downtick. Finally, Nifty has breached the crucial support zone around 15650 levels i.e. March 2022 low, the next major support exists around 14,800-15,000 zone. On the other hand, the broader indices have slumped sharply in this period and several stocks are trading in extreme oversold territory. We may see selective recovery ahead.
5. What are the key drivers and triggers for BSE Sensex and Nifty 50 going ahead?
We feel the stability in the global markets, especially the US would be an important trigger. Besides, crude movement and inflation trajectory would also remain on the participants’ radar for cues.
6. What are your overweight and underweight sectors?
We’re overweight on auto and underweight on metal packs.