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Nifty, Sensex tank 2% on weak global cues, 15700 may act as crucial support; ‘buy quality stocks on dips’

Indian benchmark indices opened with sharp cuts on Thursday, a day of weekly F&O expiry, and extended losses in morning deals as global markets fell on high US inflation data for April that dented investor confidence overnight. The BSE Sensex tanked over 1000 points to hit an intraday low of 52,994, and the NSE Nifty fell over 300 points to hit a low of 15,824.

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According to analysts, markets are expected to remain wvilatile till inflation peaks. Investors should take advantage of the dip to enter into quality names,

Indian benchmark indices opened with sharp cuts on Thursday, a day of weekly F&O expiry, and extended losses in morning deals as global markets fell on high US inflation data for April that dented investor confidence overnight. The BSE Sensex tanked over 1000 points to hit an intraday low of 52,994, and the NSE Nifty fell over 300 points to hit a low of 15,824. In the broader markets, the BSE MidCap and SmallCap indices were also weak, falling up to 1.8%. Oil prices rose more than 5% on Wednesday, further dampening investor sentiments. According to analysts, markets are expected to remain volatile till inflation peaks. Investors should take advantage of the dip to enter into quality names, they said. 

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “Inflation continues to be a major headwind for markets. Consumer inflation in the US in April coming at 8.3% reinforces market’s concern about aggressive rate hikes by the Fed and the possibility of a US recession in 2023. With a dollar index at 104 and expected to strengthen further FIIs are likely to continue selling till Indian valuation becomes attractive. Even though DII buying is more than FII selling now, that is not enough to lift sentiments in the market since the macro headwinds are strong. Market’s preference for value over growth is reflected in the strength of high quality banking stocks which are even now at buyable valuations.”

What’s dragging markets today?

Narendra Solanki-Head Fundamental Research, Anand Rathi Shares and Stock Brokers said, “Concerns over inflation and rising rates in both overseas and domestic economy is what’s making markets volatile in near term. Also sustained higher inflation print in the US yesterday raised risks of steeper hikes by the US Fed. Near term could continue to remain volatile till inflation peaks. Investors should invest in staggered manner and look to sectors line IT, Services, Manufacturing and should avoid discretionary space.”

“Major Indian equity indices Nifty and Sensex have declined over 7 per cent in month of May, so far. FIIs are likely to continue selling in short term. After four days of negative close market head downward again ahead of the CPI data released Wednesday in by US. Rising inflation and a surprise hike by the RBI, tighter financial conditions, the dropdown in equity market across the globe are the reason which dragging the market. On the downside, 15700 will act as a support level if it will break this level then, 15500 will be the next support. While on the upside Rs 16400 will act as a resistance level above this, we can expect a run-up towards 16800 levels,” said Akhilesh Jat, Analyst at CapitalVia Global Research.

What should investors do?

“The current market is falling relentlessly and has breached the 16.000 mark today. This market is not meant for the faint-hearted as further fall is possible and there will be no respite on the volatility front in the short term. Investors, especially the ones that have entered during the post covid bull market, have to taper down their expectations and need to work hard to achieve a reasonable reason. Gone are those days when any stock would rise 10% in a week or 30% in a month or 5 times in a year!! However, the current dip provides a good opportunity to add stocks and India is currently in a better position in terms of economic strength compared to its peers in the medium to long term. Investors must be cautious during these volatile times,” said Santosh Meena, Head of Research, Swastika Investmart.

Buy for the long term 

“Having a short-term mentality is dangerous as investors might get stuck in fundamentally poor stocks or at a very high price. Investing for the long term has two advantages, first, you can take advantage of the power of compounding, and second, you can sleep peacefully. The current scenario, where the environment is full of uncertainty and negative sentiments, is the best time to add stocks that have good fundamentals, growth visibility, competitive advantages, and reasonable valuations.” Santosh Meena added.

Avoid taking new positions

Akhilesh Jat, Analyst at CapitalVia Global Research said, “Nasdaq has declined more than 28% from its all-time high, while Nifty has declined nearly 15%. Currently market is very volatile and VIX is also very which is pointing towards a huge amount of volatility. So at the current juncture one should avoid to make new positions. One may look for good quality stocks for the long-term perspective. Auto sector may perform well as high food prices are in favour of farmers that may help revive tractors as well as two wheeler demand in rural areas that is the positive for the automobile sector.”

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