The Sensex and the Nifty 50 crashed on Friday, sliding as much as 3.8% in afternoon trade, taking cues from the global market rout over concerns regarding coronavirus outbreak and its implications on economic growth. With the BSE benchmark Sensex now down 1,500 points in today’s trade, should investors consider taking new positions in stocks? Here’s what market experts suggest:
Nirmal Bang Institutional Equities
“Given the earnings growth trajectory over the next two years and factoring in the corporate tax cut, Nifty at around 11,500 seems like a reasonable bottom,” Nirmal Bang Institutional Equities CEO Rahul Arora told CNBC TV18.
“But given the global situation with respect to the coronavirus, it is difficult to predict when it will stop and if it will stop in the foreseeable future,” he added. “It is a falling knife and it is probably best not to try and catch it,” he said.
Arora believes 11,000 could be a buy zone. “Even if the Nifty were to slip a couple of 100 points below that, I do not think it is the end of the world,” he said. “If you start buying now, keeping a 1-2 year horizon in mind… even if you purchase today, you may lose 5-10% on the stock that you bought today,” he said.
Rusmik Oza, senior vice-president (Head of Fundamental Research-PCG) at Kotak Securities, said: As coronavirus is spreading across the countries, the fear factor in the market is going up. Till the time the coronavirus was contained in mainland China, there was compliance in global equity markets but now as more cases are getting reported in various countries, the impact is sharper.”
“The fall in the Nifty 50 got accentuated after it broke the 200 DMA (daily moving average) placed at 11,685 and since then it is following the developed markets. Going by past precedencies, the recovery in markets is equal or higher than the fall. As the fall has been too-fast too-soon, markets have gone into oversold zone. Since the risk-reward ratio has turned favourable for the market, it is ideal to accumulate stocks, keeping in mind the downside of 11,000 for the Nifty 50.”
Samco Securities’ Head of Research Umesh Mehta said: “Indian bourses have been trading around higher valuations and hence a correction was needed to align the markets as per the mean reversion theory. Hence, this week’s fall is a valuation play with coronavirus as the scapegoat.”
“Investors should not burn their hands by selling in this fall. Rather, they should slowly and steadily pick reasonably valued quality stocks in a SIP format as every dip becomes a good buying opportunity,” he added.