Markets may correct by 5-7% in two months says JM Financial’s Gautam Shah

By: | Updated: August 10, 2017 1:41 PM

Gautam Shah of JM Financial says that Nifty to go down to sub 9,300 levels in the next couple of months.

Gautam Shah of JM Financial says that the Nifty could correct to below 9,300 levels in a couple of months. ( Image: Reuters)

Gautam Shah of JM Financial believes that the markets are going to get a lot more uglier on the back of broad based technical indicators such as the Volatility Index, and simultaneous fall in small and midcap indices. On Thursday morning, Nifty had plunged to 9,835 shedding more than 50 points. Speaking to CNBC TV18, the technical analyst explained that the momentum on the downside is much greater, and as the volumes indicate, the markets have seen widespread participation.

Pointing to the difference between previous corrections and the current correction, the expert said that earlier, the correction would happen in pockets, while now the mid caps as well as the large-caps are falling simultaneously. In fact the Nifty Mid Small Cap 400 is down by more than 0.7% in the last one month. Similarly, S&P BSE Mid Small Cap Index is down by 0.1% for the same period.

Gautam Shah also pointed out that the India VIX, is at 13, and is threatening to go to up to the levels of 16, indicating that this time around we are in for a meaningful correction. India VIX refers to the India Volatility Index, an index disseminated by the NSE. It measures the degree of volatility or fluctuation that active traders expect in the Nifty50 over the next 30 days.  To simplify, a VIX of 13 means that, for the next one month, market participants expect the Nifty to move by an annualised rate of 13 per cent in either direction. 

The analyst advised against entering the markets at the current levels. Further, Shah said that Nifty has lost 2% from the top, and if this comes as a meaningful correction, the index may further go down by 5-7%. According to his estimates, over the next couple of months, the Nifty to go down to sub 9,300 levels. For the extreme short term, Shah predicts a level of 9,700 as bulls may try to protect that psychological mark.

Yesterday, Mahesh Patil, Co-Chief Investment Officer of Birla Sun Life MNC said that a correction will be healthy at these levels. In conversation with CNBC TV-18, Mahesh Patil pointed out that as the markets have run up by more than 20% in year to date terms, a correction is due. “A correction will be healthy at these levels”, said the CIO of Birla Sun Life.

The brokerage and investment firm CLSA believes that Indian markets will grow at low double digit growth in the next one year. Sharing its outlook for various sectors, CLSA pointed out that IT has become a low growth sector, and investors should not expect double digit growth going forward.

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