Market under pressure: Experts not worried, call it regular correction

Indian equity indices, Sensex and Nifty are trading lower Friday afternoon on broad-based selling across sectors. Broader markets underperformed the benchmarks as the midcap and smallcap indices declined over a percent each. Losses in metals, banks and energy stocks weighed the most on the indices. Barring Nifty Pharma, all other sectoral indices are trading in the red. Mihir Vora, Director & CIO, Max Life Insurance and Richard Harris, Chief Executive of Port Shelter Investment Management shared their views.

“The fact that the Fed has done it now when the overall news is reasonably good should mean that we shouldn’t have a big fall at this particular time,” Harris said.

According to him, one should get too concerned about India’s underperformance. “India has had a great run recently. We are seeing some sell-off from that, so I don’t think we should be too concerned,” Harris added.

Probably over the next week or so, the markets will consolidate that this is not a sign of a big fall, Harris explained.

“So far it seems to be one of those regular corrections that we have seen depending on the change in the global narrative,” Vora stated.

Vora believes it is more of a technical thing.

According to Mihir, more damage might be in the midcap and smallcap segment than in the largecap segment.

On retail, Vora said, “FII interest was a bit low for the last few days, that may continue. Domestic did receive some money in the last couple of months, so they have been buyers. Retail – I don’t think one day can change the sentiment immediately because the momentum of retail buying and the number of Demat accounts opened every month etc are quite strong. Retailers are used to volatility. I wouldn’t be too worried about one-two days of such volatility. It is too short a timeframe to change the broad theme.”

“If this continues and we see a continued and sustained meltdown then you might see retailers getting impacted, but not so fast,” Vora added.

Oil has doubled this year, that is a pretty substantial rise, Harris said.

“We have seen the discretionary space underperform, consumer demand is weak and we have seen a shift to defensives like FMCG and IT in the last few weeks. So if there is a very sharp correction and we see a further sharp underperformance of these cyclical and local discretionaries or local infrastructure or capex cyclical then it might be a good time to start building positions. Some of these domestic cyclical ones should look at if there is a big dip in the market,” Vora further mentioned.

Vora said commodities were a bit overstretched, which is getting corrected. “They may correct a bit more, they probably will still remain at levels which were higher compared to one year back. So the extra stretch is out and we should be back to normal levels, so I don’t see major downgrades to the numbers,” he said.

As far as stocks are concerned, the best is over and it is time for consolidation – timewise and price-wise, Vora added.

“I think markets are due for consolidation but the liquidity flows will continue,” Harris agreed.