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A Very Aged Bull Market Needs a Healthy Correction and This War-Triggered Correction Has Only Made the Situation Worse, Analysts Say | Photo: Shutterstock
Stock market today, news of the stock market crash: The ongoing correction in the Indian stock market may be near its bottom, analysts said on Thursday, as they expect the Iran-Israel war to turn into a “localized” affair in the medium term.
At best, they expect the benchmark indices – BSE Sensex and Nifty50 – to fall by another 1-2 per cent and suggest investors to take advantage of these declines to buy quality large-cap stocks and select stocks mid and small capitalization.
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“The war in the Middle East could become a localized war, like the war between Russia and Ukraine, and people would accept it as ‘a part of life.'” We believe that stock markets could remain volatile in the short term. term, correcting another 1 to 3 percent until Israel’s response to the Iranian missile attack is unknown,” said G Chokkalingam, founder and head of research at Equinomics Research.
The BSE Sensex today fell 1,396 points intraday, crossing the 83,000 mark. The Nifty50 also sank 408 points, dropping the 25,400 mark intraday, as Iran fired nearly 200 ballistic missiles at Israeli military installations Tuesday evening.
The benchmark BSE index fell 3,108 points from its all-time high of 85,978, reached on September 27, 2024.
The Nifty50, for its part, lost 894.5 points from its all-time high of 26,277, reached on the same day.
In broader markets, the Nifty MidCap100 index fell 1,492.5 points and the Nifty SmallCap100 index collapsed 641 points from their respective 52-week highs.
“Every aged uptrend needs a healthy correction and this war-triggered correction has only made this situation worse. As markets are expected to remain nervous in the near term, we advise investors to take advantage of this opportunity to invest in quality large-cap companies from a long-term perspective,” said Gaurav Dua, Senior Vice President and Head of Capital Markets Strategy at Sharekhan.
He advises investors to bet on pharmaceutical and fast-moving consumer goods (FMCG) companies offering valuation comfort.
Boiling oil
The price of Brent crude has risen about 4 percent since the Iranian attack on Tuesday evening. Although this triggered a sell-off in major oil-related stocks, such as those in the oil marketing, paints, aviation and tire sectors, analysts say the rise is insignificant given that major producing countries of the world’s oil are engaged in a war.
That aside, Reuters reported that the Organization of the Petroleum Exporting Countries (OPEC) and its allied members (OPEC+) left their oil production policies unchanged on Wednesday, including a plan to begin increasing production by 180 000 barrels per day (bpd) from December.
“Consumer and infrastructure (cement) related companies could feel the pressure as the recent rise in oil prices could lead to higher costs of their raw materials. Investors could, however, take advantage of this drop to buy quality names in this sector,” said Vinod Nair, head of research at Geojit Financial Services, which also favors information technology (IT) and pharma as a long-term sector.
G Chokkalingam of Equinomics Research said overvalued and “perception-driven” small and mid-cap stocks could test the waters for some time to come.
“Thus, investors with a conservative risk profile could hold up to 15 percent in cash and gold, half of the remaining 85 percent in large caps and the rest in SMC quality stocks,” he said. he declared.
From a technical perspective, the Nifty index is trading around its 20-day moving average (DMA) of 25,500, which analysts say could trigger a short-lived rebound as selling pressure at higher levels remain a risk.
“The recent high of 26,277 is likely to act as resistance in the short term, and traders are advised to adopt a ‘sell up’ strategy until Nifty firmly crosses the high mark again. 26000. On the downside, the main support levels to watch out for are 25100 and 24800,” said Santosh Meena, Head of Research at Swastika Investmart.
Long-term investors could, however, take advantage of this correction to buy large-cap stocks, whose valuations have become attractive. Commodity-related stocks could perform well in the short term, Meena added.
First publication: October 3, 2024 | 1:33 p.m. STI