What should investors do after the 4600-point fall in Sensex?

Market Outlook

The S&P BSE Sensex, which fell by about 2 percent on Monday, is down nearly 9 percent or 4,567 points from the recent high of 52,516 in February 2021. The Nifty 50 is also down by about 7 percent from its recent peak in the same period.

The rise in COVID cases and partial lockdowns in various parts of India will hit the GDP growth of the country, suggest experts. Experts feel that any dip on account of COVID-19 should be used as a buying opportunity.

Amidst the surge in COVID-19 cases, the Delhi government announced a six-day complete lockdown from 10 pm April 19 till 5 am on April 26. Maharashtra, Uttar Pradesh, Delhi and Rajasthan are among the 10 states that account for 78.58 percent of the new COVID-19 cases reported in a day.

Experts see the Indian market to trade in a consolidated range, where 14200-14000 will act as a strong base, and, on the upside, 14800-15000 will act as stiff resistance, but there will be stock-specific opportunities in ‘Corona-proof sectors’.

The Indian market turned volatile and lost ground despite positive global cues after the Centre, on April 18, banned the supply of oxygen for industrial purposes, except in nine specified industries, to counter the shortage of cylinders amidst rising COVID infections.

The recent spike in COVID cases to 2.7 lakh in just 24 hours, according to the Union Health Ministry on Monday, will keep investors on the edge for some time but as the situation stabilises, bulls will be back, suggest experts.

“While the second wave of COVID-19 poses challenges to the ongoing economic recovery, consumers and businesses have adapted to the new normal, and lockdowns are likely to be localised. Hence, we do not expect this wave to derail the economy,” Rupen Rajguru, Head of Equity Investment and Strategy, Julius Baer, told Moneycontrol.

“In the near term, with the news flow towards the second wave of COVID intensifying (before peeking out), there will be buying interest in the ‘Corona-proof’ sectors like healthcare, IT and chemicals. Over the longer term, we like financials and domestic cyclicals as they are best positioned for the economic recovery,” he said.

With the resurgence of COVID-19 cases posing risks to economic recovery, leading brokerages have downgraded India’s GDP growth projections for the current fiscal to as low as 10 percent on local lockdowns threatening fragile recovery.

While Nomura has downgraded projections for the fiscal year ending March 2022 to 12.6 percent from 13.5 percent earlier, JP Morgan now projects GDP growth at 11 percent from 13 per cent earlier. UBS sees 10 percent GDP growth, down from 11.5 percent earlier and Citi has downgraded growth to 12 percent.

There is no denying the fact that extended lockdowns won’t have any effect on the economy. But investors who are looking at creating wealth for the long term could be stock/sector-specific where the impact will be limited.

“The economic impact of the current rise in COVID-19 cases will be significant in the short term as it will lead to lockdowns across many states. However, the demand is never fully destroyed and will come back,” Naveen Kulkarni, Chief Investment Officer, Axis Securities, told Moneycontrol.

“For many industries like travel, tourism, restaurants, and hotels, the impact will be significant. IT, pharma, metals, telecom, and consumer staples will be less affected. Discretionary consumption will be the most-affected sector and will see challenges,” he said.

India has become one the worst countries affected by COVID-19. The market plunged into double digits back in March 2020 and stabilised in April, and exactly a year after, we are again standing at the same crossroads.

Experts feel that investors should remain calm and stay with their investments, and add more on dips if possible. FY22 will be seen as a stock pickers’ market as more downgrades and restrictions will lead to knee-jerk reactions on D-Street.

“April 2021 is surely different than the sudden fear that caught us in April 2020. People and markets are better prepared and know the devil that is causing the problem, unlike in April 2020,” Nimish Shah, Chief Investment Officer, Listed Investments, Waterfield Advisors, told Moneycontrol.

“We believe that a correction of up to 10 percent from the Nifty peak of 15,200 would be a good support level – i.e., levels of 13,600-13,700. One needs to be selective on sectors like auto, large private sector banks, large NBFCs, home improvements/ electrical appliances companies, chemical, and pharma,” 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.