Over 50% of Nifty, Sensex stocks fall 10-40% in just 2 months; what to do now?

Indian market have reversed sharply after hitting their fresh record highs in January. The S&P BSE Sensex hit a record high of 42,273, while Nifty50 hit a life high of 12430 on January 20, 2020.

Sensex and Nifty50 are now down by about 16 percent and 19 percent, respectively, from their record highs in a just a matter of 2 months.

This has opened doors for long-term investors to buy into quality stocks which are available at attractive valuations, suggest experts.

More than 50 percent of the stocks in the S&P BSE Sensex and Nifty50 have recorded double-digit losses during the January 14-March 9 period, data from AceEquity showed.

As many as 19 companies in the S&P BSE Sensex have fallen 10-40 percent since January 14. The list includes TCS, Sun Pharma, ICICI Bank, M&M, Hero MotoCorp, SBI, IndusInd Bank and ONGC.

Among Nifty, 37 companies fell 10-40 percent, including Tata Motors, Yes Bank, Tata Steel, GAIL India, SBI, Hero MotoCorp, JSW Steel, Axis Bank and Bharti Infratel.

There are more than 300 stocks in the S&P BSE 500 index which have fallen 10-80 percent since January, including Bliss GVS Pharma, Andhra Bank, Indian Bank, Dilip Buildcon, Motherson Sumi, PNB, Delta Corp, Allahabad Bank, Parag Milk, Reliance Capital and Gayatri Projects.

From record high in January to 52-week low on March 9, has turned tables for the bulls. There is a fear of recession which is looming over financial markets across the globe. The rising Coronavirus cases across the world is threatening to disrupt the supply chain and slow down economic activity.

“It seems that global markets are in a firm downturn and the trigger point has been coronavirus which has impacted global growth and supply chain. As for India, crude collapsing, M-cap to GDP being at low levels, anemic growth in corporate profits in the last couple of years and low leverage in the system will save us from the hard-hitting our markets beyond a point,” Paras Bothra, President of Equity Research, Ashika Stock Broking told Moneycontrol.

“Though levels are hard to predict rather we would be more willing to focus on corporate fundamentals and its earning cycles and the market expectation of valuations for these companies, thereby the value price mismatch which the market offers,” he said.

Stay away from catching a falling knife:

The fear in the market might not let you invest at current levels. But, given the mouthwatering levels which we are witnessing should not be read as value buys, caution experts.Investors should tread carefully as global markets are largely dictating the trend and the sharp plunge in crude oil has further fuelled the uncertainty over the global growth scenario. Analyst do see a further decline in Nifty from current levels.

The upside in the market could be capped at 11,250 on the Nifty50 while the immediate support can be seen at 10,000 mark, at 9950 mark.

The Nifty had registered a new all-time high of 12,430 in January. Over there it had formed multiple bearish patterns & had entered a short term correction phase.

“The index witnessed a near vertical fall from the second half of February. On the way down, the Nifty breached the support zone of 11100-11000 where there were multiple supports. Breach of the key psychological level of 11000 on closing basis indicated that the medium term trend is down as well,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas told Moneycontrol.

“Advice for investors in the current scenario would be to stay on the sideline. Any attempt of catching the falling knife can prove to be a misadventure. Apparently, the market still has a long way to go on the downside. More colors to add to the portfolio will be visible once the dust settles down,” he said.

The Nifty declined over 18 percent from its peak and traded to the lowest level since November 2018 after crude rout and Coronavirus cases cross 1 Lakh around the world which has increased the risk of a global recession this year.

Amid fierce selling by foreign investors, the next support on the Sensex could be in the range of 34919-33,300, suggest experts.

“Between March 2 and March 6, FPIs (Foreign Portfolio Investors) withdrew a net Rs 8,997.46 crore from equities and Rs 4,159.66 crore from the debt segment which has led to a panic situation in the markets,” Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor told Moneycontrol.

“Considering all the above factors it seems that Nifty is slowly being strangled in the bearish grip. The major support level of Nifty is expected to be in the range of 10289 to 9950 and major support level of Sensex is expected to be in the range of 34,919 to 33,300,” he said.

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