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Equities in middle of bear phase, believe experts

Yatheendradas C.k. at 07:59 AM - Aug 06, 2019 ( ) Views: 59

Equities in middle of bear phase, believe experts
By: FE Bureau | Mumbai | Published: August 6, 2019 3:33:25 AM
FPIs have now offloaded stocks worth $2.35 billion in the last one month, including $285 million on Monday, data from the exchanges showed. With nearly 1,816 stocks slumping to their 52-week lows, investor wealth of close to `15.2 lakh crore has been wiped out

The equity markets on Monday ended the day with sharp losses and closed at a fresh five-month low, following fresh escalation of trade tensions between the US and China and continued FPI outflows. While the Nifty ended the day at 10,862.60, a fall of 134.75 points or 1.23%, the Sensex fell by 418.38 points or 1.13% to close at 36,699.84. Experts now believe that equities are in the midst of a bear phase.

With Monday’s fall, the Nifty is just 0.05 points away from erase the entire gains for 2019. Pramod Gubbi, founder at Marcellus Investment Managers, said, “Mid and small caps are technically in a bear phase even as only a handful of stocks have gone up. Equity markets have been weak for a while now and only a handful of stocks have been able to deliver positive returns. Otherwise, the broader markets have been weak which is reflection of lack of earnings.


In the Nifty or broader markets, there has been disappointment in earnings growth for the past four-five years. Markets were hoping for some earnings recovery, but with the current slowdown in the economy, any recovery in earnings is likely to get postponed for next few quarters.”

 

Foreign portfolio investors (FPIs) continued to trim their exposure to the Indian equity. FPIs have now offloaded stocks worth $2.35 billion in the last one month, including $285 million on Monday, data from the exchanges showed. With nearly 1,816 stocks slumping to their 52-week lows, investor wealth of close to `15.2 lakh crore has been wiped out.

The broader market, which has been in the grip of bears for well over a year now, lost more value; the number of companies with market capitalisation of Rs 1,000 crore or more fell to 68 on Monday from 853 in the December 2017 quarter.

Dharmesh Kant, head of retail research, IndiaNivesh said, “Mid & small caps are currently trading at historically low valuations and that offers a good opportunity for the markets to bounce back. This is likely to be backed by a monetary policy aimed towards stimulating the economy though a dovish and accommodative approach by the central bank. There is little to be surprised if the
surcharge on super rich is rolled back only for FPIs.”

While the Nifty Midcap index has come off by nearly 13.4% so far this year, the Nifty Smallcap has been badly bruised, losing 17.4% during the same period, on the back of a 29% fall in 2018. However, fund managers think this is not right time to enter equity markets. A fund manager speaking to investors recently said, “In terms of sentiment, we are not near thumping the table. Credit is very cheap on valuation. The current cycle encourages investment in credit for more than three years. Clearly the sentiment is giving thumping the table signal for debt mutual funds…”


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