“For those who wish to invest right now, it will be a sensible strategy to deploy 30% of the total investible funds.'
Growth concerns on China, which has already seen the yuan getting devalued twice in August, have rattled global financial markets, including that of India.
The benchmark BSE Sensex and CNX Nifty plummet 1,712 points, or 6.25 per cent, and 530 points, or 6.4 per cent, respectively, in intra-day deals on Monday.
Both indices recovered a bit to end the day 5.9 per cent lower on the previous close at 25,741 and 7,809, respectively.
The fall comes on the back of a rout in global markets on Monday, which saw Shanghai Composite slump over nine per cent. Nikkei and Straits Times Index dropped around 4.8 per cent and 4.5 per cent, respectively.
The rupee breached the 66 mark versus the dollar.
“The fall has been due to global factors and China has been the main culprit. I think we had too much complacency globally, that the slowdown in China won't affect anybody. So, the markets are realising now that's not true. There are many emerging market currencies that have fallen sharply and markets do not like uncertainty. As a result, there is a risk-off and the Indian markets cannot escape that," said Andrew Holland, chief executive, Ambit Investment Advisors.
The drop in the preliminary Caixin Manufacturing Purchasing Managers' Index (PMI), of factory activity in China, for August to 47.1 from 47.8 in July, added to fears.
The US markets, too, dropped on Friday after the US manufacturing sector slowed unexpectedly to its weakest pace in almost two years in August, according to Markit.
The preliminary US Manufacturing PMI fell to 52.9 in August (its lowest since October 2013) from a final July reading of 53.8. G Chokkalingam, founder & managing director, Equinomics Research & Advisory, said, “Global deflationary pressures are once again hitting equity markets across the world and we do acknowledge chances of global deflationary pressures are slowly rising. Three key factors would determine the chances of the world economy falling into a recession: Chinese GDP growth falling to six per cent or lower; the euro region failing to pull up its growth beyond 0.3 per cent in one year; and the US economy failing to pull up its GDP growth back to 2.5 per cent or more in one year."
Investment strategy
Holland of Ambit had been expecting the Nifty to trade in a range of 8,000 to 8,500 levels for some time now, and he believes the index can overshoot 8,000 on the downside.
“This is a pivotal week for the markets and the worst is not likely to play now in terms of key levels. Retail investors should sit on the sidelines. Even for our fund, we are sitting on nearly 65 per cent in cash now, waiting for volatility to play out. For those who wish to invest now, it will be sensible to deploy 30 per cent of the total investible funds. The sectors/stocks we are looking at closely now are banking (private sector ones), Reliance Industries Ltd (RIL) and Maruti Suzuki,” he says.
Jigar Shah, chief executive, Maybank Kim Eng Securities, says, “If the global markets fall, India cannot escape the rout. It will be a sensible to wait out this uncertainty. Though the markets could see a recovery, given the sharp fall, this could be misleading, as people will put in money thinking it is a bottom. This is a fairly complex global situation and will take time to resolve."
Ravi Shenoy, vice-president, midcaps research, Motilal Oswal Securities, remains cautious on cyclicals, including commodities and interest-rate sensitive stocks — automobiles, banks, cement, metals, and oil and gas.
EXPERTS’ VIEWS
ANDREW HOLLAND
CEO, Ambit Investment Advisors
“For those who wish to invest right now, it will be a sensible strategy to deploy 30% of the total investible funds. We are closely monitoring private sector banks, RIL and Maruti Suzuki”
TIRTHANKAR PATNAIK
India strategist at Mizuho Bank
“Markets are worried about the global growth led by China. India has done well among emerging markets, but this is not a good time to add stocks. At lower levels, one can look at pharma and IT”
MOTILAL OSWAL
CMD, Motilal Oswal Financial Services
“Our markets are down in line with global trends, although our macroeconomic fundamentals are not negative. They may take some time to stabilise. I see a good chance to buy medium-to-long term”
DINESH THAKKAR
CMD, Angel Broking
“Once the selling from FIIs abates, investors could look towards export-driven sectors such as information technology & pharma and names across private banks, auto and infra”
