After three consecutive sessions of losses, equity benchmark Nifty 50 rose about half a per cent on Tuesday, October 17 as hopes prevailed that the Israel-Hamas war would not spread to other countries.
Nifty 50 closed the day at 19,811.50, up 80 points, or 0.40 per cent while the Sensex closed the day at 66,428.09, up 261 points, or 0.39 per cent.
According to a Reuters report, “US President Joe Biden will visit Israel on Wednesday. After visiting Israel, Biden would travel to Jordan to meet King Abdullah, Egyptian President Abdel Fattah al-Sisi and Palestinian Authority President Mahmoud Abbas.”
Market analysts interpret this as a signal directed towards both Iran and the Lebanese militant organisation Hezbollah, cautioning against any potential involvement in the ongoing conflict. This strategic move has the potential to contain the war within its current boundaries and prevent its escalation into neighbouring nations.
Also Read: Israel-Hamas war LIVE updates: Heavy Israeli airstrikes pound Southern Gaza
Apart from the ongoing Israel-Hamas war, inflation, interest rates trajectory and quarterly earnings remain important triggers for the market.
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Is it time to buy stocks?
While the persisting risks of global economic slowdown, higher interest rates and sticky inflation keep the markets worried, fresh geopolitical concerns have added to the worries.
Santosh Pandey, President and Head of Nuvama Professional Clients Group believes that the Indian markets are at a crossroads. Internally India is doing very well as inflation is under control, interest rate is stable and corporate earnings are in line with estimates so far. However, global cues are troubling.
Pandey pointed out that the US Inflation, increasing bond yields, high debt issues and China’s internal growth rate not improving are a cause of concerns. These things are making markets a little uneasy.
Also Read: Stocks to buy: Biocon, Dr Reddy’s, Sun Pharma, among Phillip Capital’s pharma stock picks for up to 22% upside
However, most experts remain bullish on the Indian market for the long term and they believe one should buy in this market in case of a correction.
Pandey said if the market corrects from here, it would be a great entry price for investors as he remains bullish on India for the long term.
Along similar lines, Apurva Sheth, the head of market perspectives and research at SAMCO Securities said traders and investors with a short-term horizon can look forward to benefiting from the current buoyancy and look for long opportunities in individual stocks by increasing their exposure.
G. Chokkalingam, Founder and Head of Research at Equinomics Research is positive about the domestic equity market for the medium to long term (post-2024 General Elections) due to an impressive growth outlook.
However, Chokkalingam believes in the short-term, rich valuation of small and mid-cap stocks, continued pressures on the rupee exchange rate due to rising oil prices, declining goods exports and FII (foreign institutional investors) selling of equities, possible uncertainties from forthcoming state elections and finally General Election in May and the ongoing Israel-Hamas war could lead to volatility in the markets with downward bias.
“We remain concerned about the domestic equity market in the short-term, especially about the SMC (small and mid-cap) segments, due to relative valuations. If the Israel war leads to tensions across the Middle East, then the oil prices may further shoot up, aggravating pressures for the Indian economy and markets in the short term,” said Chokkalingam.
Technical indicators are also supporting positive views on the markets.
KKunal V Parar, Vice President – Technical and Algo at Choice Broking pointed out that the the monthly and weekly charts of the Nifty reveal that the index has been venturing into uncharted territory, with all its long-term moving averages trending upward. This is a strong indicator of the overall economic health, as the market serves as a barometer for assessing the state of the economy.
“When analyzing recent charts, it becomes evident that some large-cap stocks are trading near significant support levels. Stocks such as Reliance, HDFC Bank, Infosys, Vedanta, and BPCL are noteworthy examples. Additionally, a few stocks have broken out from their previous ranges and appear poised for strong performance,” said Parar.
Furthermore, Parar believes there is the prospect of an election-related rally, which could potentially propel large-cap stocks to higher levels.
“Taking the overall picture into consideration, the current market situation appears quite enticing. It’s reasonable to expect an average return of approximately 15-18 per cent in the near term.
What to buy in this market?
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services says ideal ‘buy on dip’ sectors are capital goods, automobiles and financials.
“Capital goods and automobiles are in a cyclical uptrend and the cycle will last for a few years. There is robust demand for capital goods and the automobile sector will benefit from demand recovery plus margin improvement arising from a fall in commodity prices. Financials, particularly banking, are doing well and valuations are lower than historical averages,” said Vijayakumar.
Also Read: Interest rates have peaked; positive on India’s long-term story, says Shreyash Devalkar of Axis Mutual Fund
Pandey of Nuvama finds sugar, paper stocks, select capital goods and energy stocks attractive.
“I will not be fully invested and create some cash to the extent of 15-20 per cent. However, there are pockets of sectors and stocks which are still attractive like sugar, paper stocks, select capital goods and energy stocks. This is the market where themes will continue to do well, and we should focus on those themes and stocks where we see growth above 25 per cent ( there are ample no of stocks) and ignore the broader market,” said Pandey.
Also Read: Top 5 defence stocks to watch out in Nifty’s run-up to 40,000
Chokkalingam suggests a cautious approach at this juncture, maintaining limited exposures to SMC segments in the short term and a tilt towards large and large midcap segments. He also suggests keeping at least 5 per cent each in cash and gold ETF.
Also Read: Stocks to buy this week: RIL, DMart, Tata Consumer, Sobha among 12 technical picks; do you own any?
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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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