Tempted by the surge in share markets? The surge might be temporary, warn analysts

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Updated: Mar 27, 2020 3:45 PM

After having hit a low of 26,000 points on Monday, S&P BSE Sensex has jumped more than 3,600 points in the last four trading sessions.

brokerage favourite stocks, kotak securities, buy these stocks, best stock to invest after stock market correction, top stock idea, best stock investment ideaCoronavirus that has dragged the equity markets low several year lows is not finished guiding the market movement.

After having hit a low of 26,000 points on Monday, S&P BSE Sensex has jumped more than 3,600 points in the last four trading sessions. On the other hand the broader NSE Nifty-50 sank below the 7,600 level on Monday, but since then has gained over 1,000 points to above 8,600 now. With the recent surge there is only one question that comes to an investors mind — has the market bottomed out? Well, the answer, according to experts, is: Not Yet.

“We cannot call a bottom in the market, valuations in the market were at multi-year lows in the past few days, even below averages that is the key reason why even dormant retail accounts are being activated,” S Ranganathan, Research Head, LKP Securities told Financial Express Online. Ranganathan pointed out that even the dormant retail accounts are picking up equity after several months for probably a long-term, eyeing the multi-year low prices. Domestic equity benchmarks Sensex and Nifty have fallen close to 30% each since the beginning of this year aided by the coronavirus pandemic.

While one might be tempted to reach the conclusion that markets have reached the bottom and that there is no going down further, that actually is not the case, said Milan Viashnav, Consulting Technical Analyst, Gemstone Equity Research & Advisory Services. “We have seen the surge over the past two days purely on the back of hefty short-covering. We can certainly say that the markets are attempting to find a bottom, but they have not done so as yet. We need to wait for the confirmation. Much would depend upon NIFTY able to keep its head above the 8550 levels. If not, then we will see the markets slipping in a broad consolidation without any confirmation for the bottom,” he added.

Coronavirus that has dragged the equity markets low several year lows is not finished guiding the market movement, if analysts are to be believed. “Probably market (Nifty) will go to about 9,000 points and then fall, until and unless we see incremental positive news on less cases of Coronavirus or a vaccine coming through or the government stimulates in a big way,” Abhimanyu Sofat, head of research, IIFL Securities told Financial Express Online. Sofat did not pin high hopes on a government stimulus for markets saying that it was restricted. He adds that Nifty can rise above 10,000 points only if there is a lot of stimulation of positive news.

Market participants are also pinning hopes on some sustenance from the government. Sofat said that a large part of the equity market is expecting something on NPAs as various sectors such as micro-finance and real estate stare at an immediate impact. “A lot of people will not earn money so for that we have to look at clues coming in from the RBI, so what the RBI can provide to the people. Until that happens I don’t think that the recovery will be so fast that we can easily touch the previous levels,” he said, yesterday, before the Reserve Bank of India’s stimulus package.

The way domestic institutional investors act will guide the market further as FIIs will continue to exit. Meanwhile Viashnav does not expect Nifty to rise meaningfully above 8750 levels in the event of the pullback extending itself.

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