Market strategy: Buy in the dip or sell when the markets rally?

Advertisement



It has been a choppy ride for the over the p ast few weeks. Despite several attempts, the indices have failed to cling to the gains, and succumbed to global and domestic cues.

Advertisement

Analysts expect the to remain choppy in 2022. But there would be ample stock-specific opportunities all through the year, they suggest.



However, analysts caution that timing the will not be a wise strategy at the current levels given the slave of domestic and global developments over the next few weeks.

For instance, geopolitical developments related to the Russia-Ukraine war and its implications in commodity markets, especially oil and gas, will keep the global markets volatile. At home, the Reserve Bank of India’s plans to hike rates may not have been fully discounted yet by the markets.

Sonal Varma of Nomura, meanwhile, says she expects a 50bp hike in June, and 35bp in August; and a terminal rate of 6.25 per cent by April 2023. However, rising fiscal risks will likely complicate the RBI’s liquidity withdrawal strategy.

Thus far in 2022, the S&P BSE Sensex and the Nifty50 have lost around 7 per cent each.

The correction in the mid-and small-caps h as been even sharper, with both the indices slipping 10 per cent and 11 per cent, respectively, on the BSE during this period.

Advertisement

In the past week, however, there has been some pullback as the S&P BSE Sensex and the Nifty50 moved up nearly 2.5 per cent each amid volatility.

Analysts believe, the recent pullback may still have some steam left.

According to ICICI Securities, the current recovery for the Nifty may extend towards 17,000 levels. However, 15,600 will remain a very crucial level to watch out for.

As regards inflation, analysts believe the government’s measures to cut excise duty on petrol and diesel and measures to bring down the cost of cement and steel will be beneficial. Yet, inflation could remain substantially above the RBI’s target range of 2 to 6 per cent.

On the contrary, any correction in oil and commodity prices might allay the inflation fears to some extent and present the trigger for an up move in the markets.

Sunil Singhania of Abakkus Asset Manager, on his part, believes the inflation has peaked.

Advertisement

If our view on oil, commodity and inflation does come true, then there might be a surprise of interest rising less than expected, says Singhania. Any such possibility can be a key catalyst for a risk-on and positive for equity markets, he says.

With fundamentals continuing to be strong for India and now valuations also in line with 10-year averages, Singhania believes the risk-reward for investors is only getting better. The asset manager continues to remain constructive on the markets.

On Friday, the markets are likely to remain choppy in a range as they track domestic and global cues. Stock-specific action, however, will continue.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard,

Digital Editor





Source link

Leave a Comment

Your email address will not be published.