'If you are invested in mid-cap and small-cap stocks, even if you are making losses right now, it is better to sell them now and sit on cash.'
Independent market expert Ambareesh Baliga expects the Nifty could even fall to 16,000 in the coming days; if panic and fear persists, it could even touch 15,000, he tells Prasanna D Zore/Rediff.com.
What's got the market worried? Was a 3 per cent fall in Sensex and Nifty expected when markets closed down on Friday?
While the three per cent fall was not expected, the market was expected to fall today (Monday) because of the Ukraine issue. The sharp spike in oil prices to around $95 per barrel also got the markets in a tailspin.
Global as well as domestic inflation rising is another worry that the market is still discounting and (US Fed) rate hikes which are expected along with the Q3 (corporate earnings) numbers -- if you look at the granular picture -- of most companies suggest that they are facing margin issues because of the increase in raw material prices, which they are not able to pass on to consumers.
These are some of the major reasons why we have been seeing weakness in the markets, but today's fall was led by geo-political tensions in Eastern Europe and its impact on crude prices.
How do you see the tensions between Ukraine-NATO and Russia impacting emerging markets like India?
Emerging markets will obviously face the consequences of the tensions in Ukraine and its resultant impact on crude prices and currency markets.
Specifically to India, the rupee could get bit weaker in the coming days, although the footprints of RBI intervention (in the currency market to stem the sudden fall of Indian rupee) was clearly evident.
In case, the tensions in Eastern Europe escalates the rupee could fall to around 77-78 to the US dollar.
With crude oil being one of the major imports in India we could be in for a double whammy. Although, we have started ethanol-mixing (with petrol) and reached 10 per cent it would be better if we accelerate it to around 20 per cent (to lessen the impact of sharp spikes in crude prices).
What could soothe the ruffled feathers of Indian equity markets?
If the Russia-Ukraine issue blows away without much happening, according to what the markets are expecting now, and if these tensions stabilise over the next three-four weeks then that will be a major relief.
I don't think the (US) Fed will defer it (raising interest rates) any further so nothing is expected (no positive surprise) from that quarter.
While the RBI should have gone for a policy rate hike this time (during the monetary policy announcement on February 10) they are surely raise it the next time (scheduled between April 6 and 8).
Against three per cent drops in the Nifty and Sensex, the Nifty Bank Index fell more than 4 per cent. Are there more worries for the banking and financial sector companies?
The issues related to this sector would have more to do with the NBFCs and the loans given to the MSMEs to cope with the financial losses arising due to COVID-19 pandemic. The repayment of these loans is falling due and there could be issues there (in default of repayment of loans).
What kind of sectors and stocks should investors focus on once some signs of stability are visible in our markets?
One should be looking at companies and sectors that are export-oriented. I would certainly look at the pharma sector; I would also look at the auto sector because in the next three-four months chips shortage should be sorted out.
The IT sector too would be back in the reckoning because whenever the rupee weakens (against the US dollar) it gives a short term upswing for the sector.
What advice would you have for retail investors?
I have been cautioning retail investors to book some profits and sit on cash for a while. Maybe, if the market corrects further one could look at buying opportunities but not at current levels.
Long term investors should not sell bluechip stocks that have done better; but if they had entered into mid-caps and small-caps from any sector for short-term gains then they should book profits and sit on cash. When the markets come down they (the mid-caps and small-caps) are the ones that face the biggest brunt.
For example, if you look at KPIT, a small-cap stock from the IT sector -- even if the sector is likely to do better given the expected weakness in the rupee -- the stock has crashed by more than 20-25 per cent in just a couple of days.
If you are invested in mid-cap and small-cap stocks, even if you are making losses right now, it is better to sell them now and sit on cash.
Any levels at which markets could see some buying emerge or settle and consolidate?
!6,800 is a very strong support for Nifty but (given the current situation) I see that level breaking.
Possibly, we should settle somewhere around 16,000 but if fear and panic continue we could continue falling further. 16,000 is (coming) sure but one could even see 15,000; if panic persists you don't know how people (investors) will sell.