What to buy after 1624-point fall; top 10 stocks for long-term investment
By Kshitij Anand, ECONOMICTIMES.COM | 24 Aug, 2015, 04.14PM IST
NEW DELHI: The S&P BSE Sensex plunged over 1600 points in trade on Monday to record its biggest intraday fall since June 2009. The 50-share Nifty index also slipped below its crucial support level of 7900, to record its steepest fall since October 2008.
The overall investors' wealth, measured in terms of total valuation of all listed stocks, plunged by about Rs 7 lakh crore as it crashed below Rs 100-lakh crore mark and stood at Rs 95,34,540 crore in afternoon trade on the BSE. Market cap on 21 August stood at Rs 1,02,32,792.24.
Although sharp losses and gains in equity markets is a regular phenomenon, what stands out this time is the explosive rise of more than 40 per cent in implied volatility (a measure of risk perception and an indicator of fear), say experts.
"The epicentre of this market volatility lies in problems faced by commodity producers and emerging markets. While a sharp decline in commodity prices has created the fault lines, China seems to be at the epicenter of the recent bout of volatility," says Sahil Kapoor, Chief Market Strategist, Edelweiss Financial Services.
"A 61 per cent decline in crude oil in the last 1 year and large cuts in agricultural commodity prices have shattered the fiscal positions of most commodity producers like Brazil, Russia, Argentina and OPEC, leading to a sharp depreciation of these currencies," he added.
Kapoor further added that slowing growth in China prompted the Chinese central bank to weaken Yuan in line with other emerging markets, triggering instability across the globe.
The catalyst for the current fall in equity markets across the globe has been China's devaluation of the Yuan which has made the market much more nervous about deflation and competitive devaluation of currencies by countries across the board.
"India should benefit fundamentally as we are importers of energy and metals, the prices of which are falling, and our economy is a lot less dependent on manufacturing exports (the area where a lot of pain is possible)," says Gautam Sinha Roy, Vice President - Fund Manager, Motilal Oswal AMC.
"We are seeing this as a decent buying opportunity- while India is falling as a collateral effect of the global rout, some of the important macro parameters for the country have become incrementally positive only - e.g. the fall in crude prices is hugely beneficial for us, so is the fall in other raw material prices which India imports. The currency fall is positive for exports, but is otherwise dangerous," he added.
There is over ownership in IT, financial services and consumer goods. But in the current environment, probably IT is among the favourites of investors, but financials could get hit further, say experts.
"The financial services sector could come under pressure because if the recovery -- which was expected in the domestic economy in the second half of the year -- is delayed, then the challenges in the domestic financials will continue," says Krishna Kumar Karwa, MD & CFO, Emkay Global.
"Private sector banks could be vulnerable because that is where the valuations are relatively rich and the expectations are that they will continue to do well. If the economy struggles for any reason, then may be some of the NPA issues will crop up in some of these private banks," he added.
We have collated views and recommendations from various experts across brokerage firms on stocks which can be bought on dips for an investment horizon of minimum 1 year