The last few weeks have been turbulent for the Indian market which continues to face risks such as the Russia-Ukraine war, soaring inflation, high oil prices and a rising interest rate environment.
The Sensex and the Nifty were trading in the green in the afternoon on April 20, a relief for investors after five days but the market is still not out of the woods as the fall has been steep and several challenges lay ahead.
The 30-pack Sensex lost 4,137 points, or 7.3 percent, in two weeks to fall to 56,463 on April 19 from 60,600 on April 4. The broader space, however, fared better, with the BSE midcap index losing 1.2 percent during the period and smallcap index ending 1.07 percent lower.
More than half of smallcap index stocks gained, with more than 100 of the stocks reporting double-digit gains in the two-week period.
Sunflag Iron and Steel Company was the biggest gainer, rising 60 percent followed by Chennai Petroleum Corporation, Shiva Cement, Swan Energy, and Bharat Dynamics, which were up more than 40 percent each.
Shree Renuka Sugars, Sadbhav Infrastructure Projects, Siyaram Silk Mills, Gujarat Ambuja Exports, Suryoday Small Finance Bank, Mangalore Refinery and Petrochemicals, Gokul Agro Resources, and Time Technoplast clocked gains in the range of 30-40 percent.
Genus Power Infrastructures, BLS International Services, Mirza International, Navkar Corporation, Uttam Sugar Mills, Reliance Industrial Infrastructure, JBM Auto, Ujjivan Financial Services, OnMobile Global, Mangalore Chemicals and Fertilisers, Minda Corporation, IIFL Finance, Neuland Laboratories, Zuari Agro Chemicals, Deepak Fertilizers, and Salasar Techno Engineering surged more than 20 percent.
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Mid and largecaps take a beating
The picture was reversed for midcap and largecaps stocks. The advance-decline ratio was largely in favour of the bears, as 58 midcap stocks declined for 35 advancing and about 57 stocks fell against 33 rising stocks in the largecap space.
HDFC group and IT stocks were laggards. HDFC group stocks rallied sharply on April 4 after the announcement of the merger between HDFC and HDFC Bank only to head south soon after.
HDFC corrected 20 percent in the last two weeks, HDFC Bank plunged 19 percent and HDFC AMC was down 10 percent during the period.
Technology stocks lost momentum after Infosys’ quarterly earnings missed analysts’ expectations and there was a fall on a sequential basis in order wins.
Analysts lowered their EPS estimates for the current financial year due to slower growth and margin pressure.
Infosys shares plunged 17 percent, while Tech Mahindra, L&T Infotech and Wipro were down 12-13 percent during the period.
With the market in the green, these stocks were trading higher on April 20. At 2 pm, HDFC Bank was trading at Rs 1,350 on BSE, up 0.56 percent and HDFC had gained 1.3 percent to Rs 2,166. Infosys was up 1.6 percent at Rs 1,587, while TCS rose 2.5 percent to Rs 3,559. Wipro gained a percent to Rs 535.
FIIs in sell mode
If we see the FIIs outflow of the last few days, they seem to be big sellers in the abovementioned key largecaps. Growth concerns due to the Ukraine-Russia war, inflation and higher oil prices are other reasons for the sell-off.
“The dominant near-term feature of this market is the massive FII selling. In a context devoid of positive news, this massive delivery based selling, particularly in bluechips, is dragging the market down. An important point to note is that on Tuesday the market collapse happened in the last hour. This indicates ETF selling,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
He said there is a clear see-saw battle between the pessimistic FIIs and the optimistic DIIs.
FIIs have net sold more than Rs 12,000 crore worth of shares in the last two days, taking the total outflow in April to Rs 23,000 crore. DIIs, however, have net bought more than Rs 7,000 crore worth of shares, taking the total inflow to Rs 13,000 crore in April so far.
“The current FII outflow maybe a result of couple of things. First, with rising US treasury yield there is a shift from emerging markets to developed markets and second, global portfolio managers maybe reallocating within the emerging market basket from commodity-importing countries to commodity producers, given the high commodity prices,” Ihab Dalwai, Fund Manager at ICICI Prudential AMC said.
Vijayakumar said retail investors can bottom fish in this market, where indiscriminate ETF selling has dragged down high-quality stocks with good earnings visibility.
“There is good value emerging in telecom and select financials. If IT, which is weak now, corrects further, there will be opportunities for cherry-picking. Calibrated buying can begin now,” he said.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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