Anyone invested in stocks before and during the lockdown of March 2020 must have seen their investments crumble to pieces. Having suffered a triple blow of recession fears in the US, inflationary pressure, and the Fed’s rate hike, headline index Sensex, and Nifty50 have had their worst week in over two years. The headline index BSE Sensex has fallen over 7,500 points YTD and Nifty has recorded a fall of more than 2,200 points in 2022 so far.
“We expect the market to remain under pressure with increasing fears of economic slowdown,” Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services, said.
In such a scenario, ‘buy low and sell high’ is a piece of advice that gets thrown around quite often. And while it does sound nice, it’s easier said than done. Experts say that volatility is simply a part of how markets work and it is unpredictable by nature. As any seasoned investor will tell you, timing the market is next to impossible. So, it’s better to stick to a steady investment plan rather than get caught in decision paralysis.
Punit Patni, Equity Research Analyst, Swastika Investmart Ltd., said: “Every investor must understand that bears and bulls are part and parcel of the investing process, and these arduous times will be the biggest tests of the investor’s patience and psychological strength. “Be greedy when others are fearful”, one of the best times to invest is during uncertain and volatile periods. The current correction provides a good opportunity to accumulate quality stocks.”
Right Time To Buy The Dip?
Neeraj Chadawar, head – quantitative equity research, Axis Securities, said: “As expected, the central banks are focussing more on controlling the inflationary scenario by front-loading the rising rates in the next six months. We have to see how the sustainable demand scenario pans out in the near term, but inflation could touch the higher levels in the next couple of months and start to see the moderation path in the next one or two quarters. However, we believe, in the near term, the market performance is likely to be range-bound, led by overall weaker global cues as the Indian market is holding an 89 per cent correlation with the US markets in the last year. So, in the near term, the market will follow the direction of the US market.”
“The current India VIX is trading slightly above the LTA levels, and the clear trend is likely to emerge only after the volatility stays at the lower levels for a longer time. We believe, though aggressive policy tightening will help in curbing inflationary pressure, persistently elevated oil and commodity prices would continue to pose challenges to the market multiple in the next few quarters. Investors should focus on the asset allocation and use this volatility in a calibrated manner in the next couple of months to build long-term positions in quality companies, where the earnings visibility is high for the next couple of years.”
Foreign investors have already sold stocks worth around Rs 1.9 lakh crore so far in 2022. FIIs are also expected to maintain their selling spree with the central banks’ policy tone pointing towards continued rate hikes of higher magnitude.
Technical analysis shows that the market has been in a sharp downtrend over the last 14-15 sessions. “Minor consolidations or small upside bounces have resulted in a sharp weakness as of now. Hence, any upside bounce from here could be a sell-on-rise opportunity for the short term,” said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.
On the higher side, the area of 15,600 levels (mid part of Thursday’s long bear candle) is expected to be a crucial overhead resistance ahead and is unlikely to be broken on the upside in a hurry. After a small upside bounce, the Nifty could slide down to the 15,000-14,800 levels in the near term.
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