Friday 17 June 2022

Nifty falls to 52-week low; should you be acquisitive or frightened?

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A week that began with hope ended in gloom on Dalal Street. The bears ran amok, leaving many investors and traders in vain for shelter. The Sensex plunged to its 52-week lows; Nifty traded near or at their respective 52-week lows. In the midst of this gloom and doom, everyone wonders, as legendary investors like Warren Buffett would ask them - should an investor be afraid or greedy? There may not be a direct answer to this simple question. An investor should be careful. If your stock exposure is very high, sell profitable stocks and if it is too low, the time is right to buy stocks, but very slowly as there could be more downside. This week's fall marked the fifth straight decline for the market and the ninth such fall in the last 10 sessions. Sensex has lost almost 8% in these 10 sessions and investors have suffered a loss of Rs 20 lakh crore over the period. The recent sell-off can be largely attributed to the Federal Reserve going from cautiously hawkish to extremely hawkish in a matter of weeks. The central bank suddenly hiked interest rates by 75 basis points, the highest level in almost three decades. This was due to unchecked inflation. Many believe this extreme hawkishness can also be imported into India as inflation becomes a sore point for the Reserve Bank of India as well. The RBI has already hiked repo rates, the rate at which it lends to banks, by 90 basis points since May. They are now in Operation Warp Speed, not only shocking the markets but also unable to convincingly determine future expectations. We believe that near-term concerns dominate, but stock market corrections remain an opportunity to add to your long-term portfolio. The stock market crash is an opportunity. It could be some final days of autumn, especially if the Ukraine issue is resolved and China reopens its ports and shops. There are indications, but uncertainty remains. According to the weekly data, 14800 could be the worst case level for the index. Although much depends on the FII flow dictated by events in their home country. Currently, Nifty is trading at a price-to-earnings ratio of 19, which is on the lower end of the average for the last 5 years. At the same time, the Nifty Midcap 100 is trading at a price-to-earnings ratio of 20.8, which is on the low side of the last 5 years. We believe the market is now in a consolidation zone due to global and domestic issues, but at this point all near-negative values ​​in the market are priced in, valuations are attractive to long-term investors.

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