Amid volatile movement in the market, especially given a number of headwinds including inflation and rising interest rates, traders are keen on limiting losses. Moreover, the earnings season that is gathering pace may increase volatility. However, there are some analysts who believe the downside will be limited in the market even if we see some selling.
“Nifty is unlikely to break below 17,300. Buy on dips is likely to support the market. Financials have the potential to support the market,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
In the last one month, the market has seen consolidation. It has moved in a narrow range of 1,000 points between 17,000 to 18,000, returning about 1 percent. Heavy selling by foreign investors has been another reason behind this.
“The market turned weak on negative cues from global markets and renewed FPI selling. Rising inflation in the US which has touched 8.5 percent in March and the increasingly hawkish Fed are headwinds for the markets. FIIs who were buyers in early April again turned sellers, impacting sentiments,” said Vijaykumar.
“Also, RBI’s downward revision in growth to 7.2 percent for FY23 from 7.8 percent earlier and upward revision in inflation to 5.7 percent from 4.5 percent earlier have moderated expectations a bit.”
But it is not that there are no avenues to make money in the market. There are many sectors and segment that may provide some good buying opportunities going ahead.
“There has been profit booking in IT stocks which have brought down their valuations lower. So, further selling in IT stocks will be subdued. Results from financials, particularly leading banks will be good and they can impart resilience to the market,” said Vijaykumar.
He added that mid- and small-caps have been outperforming the large-caps and this trend is likely to continue. “Retail investors are aggressively buying mid-and small-caps. Importantly, there is no pressure of FPI selling in this segment.”
Talking about Bharat Dynamics that has seen some heavy buying in the past few sessions, Vijaykumar credited the war for the rally. “The war in Ukraine has a positive fallout for defense equipment manufacturers. BDL is India’s leading manufacturer of missiles – surface to air missiles and anti-tank missiles. The US and the West are supplying these missiles to Ukraine and demand for these weapons has increased.”
He also said even as stocks like JSW Steel, BEL, HAL, AU Small Finance Bank, Varun Beverages, Poonawala Fincorp and Deepak Fetilisers are trading at all-time high levels, you should not book profits in them.
“It is not a good strategy to sell stocks scaling new highs, just as it doesn’t make sense buying stocks touching new lows. Ride the winners,” he said.
First published in Economic Times
