Mkts at 2-yr low: Experts make sense of mayhem

Big carnage was seen on the Dalal Street, as it was a capitulation day for the markets; bears took complete control over bulls. Metal and realty stocks got crushed very badly following technology, capital goods, power, telecom, oil & gas and banking stocks. Midcap and small cap stocks also took huge beating on the bourses.

The Nifty and Sensex touched new-2008 low, due to this global meltdown. All indices ended in red. The Sensex tumbled 793.35 points and Nifty fell 236.7 points to hit an intraday as well as new-2008 low of 11,732.97 and 3581.60, respectively. The Sensex closed with a loss of 724.62 points or 5.78% at 11,801.70. The Nifty fell 215.95 points or 5.66%, to settle at 3602.35.

E Mathew, Director, Mathew Easow Fiscal Services, said the decisive move below 3,800 has certainly created tremendous amount of panic. “A lot of fundamental analysts are now following technicals. As one level breaks after the other, a sense of panic is creeping in, which in the long run may be good for the market and could lead to capitulation.”

He sees major support for the Nifty below 3,800 at 3,570-3,600. “It has to be said that important levels one after the other are getting violated. Nevertheless, I do feel the capitulation levels could take us somewhere close 3,570-3,600. In a way if a total sell-off takes place, it could be good for markets, so that the poison is totally cleaned out from the system.”

Mathew believes markets may reach the capitulation stage this week itself, because, Infosys’ results are not going to be too encouraging and there is no silver lining as of now in Europe. “These are typical signs of capitulation levels and hopefully the last bull would have also bailed out. After this, some sort of base building could commence around 3,570-3,600 zone.”

Vikas Sethi, Managing Director, Sethi Finmart said that there is panic everywhere; people are not trying to look at the markets from an investment point of view. “They are just looking at the market on a daily basis and whoever would have put in money in the last three-four days would have suddenly lost it in huge percentage terms. My advice to investors would be that this is a very good time to get into the market and start investing in the market and if people do invest in the market at the current level, I feel they would be committing the same mistake, which they have done by not selling the stocks at 21,000 levels.”

Ambareesh Baliga of Karvy Stock Broking does not expect any sort of bounceback from the current levels in the near future and believes that the liquidity crunch is driving the markets down. He expects this scenario to continue for some more time. “It does not matter whether it is 3,650 on the Nifty or 12,000 levels on the Sensex today because most people have given up."

“Clearly stop losses are being triggered. There are margin calls happening but unlike in the past where people used to come and start buying whenever the markets used to fall hoping for a bounce back; the market scenario is such that even people who used to come and start buying in a bounce back have disappeared,” Baliga added.

Baliga does not expect anybody to come forward and start buying as the market is close to panic and many people have given up on the markets. He does not believe that payment issues would be a problem in the Indian market. “I do not see any sort of payment issues cropping up unless brokers are making high amounts of margin funding, which I do not think is happening. I do not expect any sort of issues from Indian markets.” Baliga said that the market did not expect Reliance to quote below Rs 1800 and is sure there would have been some margin calls at Rs 1,700 levels.

Devangshu Dutta, Consulting Editor, Outlook, feels that in today’s terms the market seems to be holding at 3615-3620 levels. He sees lower prices this week, maybe 3500 before there is a significant turnaround. “And today’s fall was so sharp that it probably triggered a lot of margin calls and obviously what happens in the US overnight is likely to be fairly important.”

Mehraboon Irani, Vice President, PMS, Centrum Broking said what we saw in the second half of Friday and what we are seeing today is just like a tidal wave sweeping across and we are just waiting over there trying for survival. “Over the next couple of days, we could reach a climax at least for the time being and possibly a rally could surface from there or maybe there could be a further capitulation of the stocks prices around the time results of the company start coming in, which could probably provide the base for the next rally to come in.”

“There is absolutely no demand, we are in for a cyclical slowdown, and results are not going to be interesting. People are saying things are attractive, I also say things are attractive but attractive from the value angle but from the growth angle I don’t think there are many corporates where anybody can confidently state that they are going to grow consistently in terms of numbers as far as topline and bottomline goes over the next three-four quarters because this is a slowdown, which is also going to take its toll, Irani added.

Shashank Khade, Vice President, Portfolio Management Services, Kotak Securities believes that the fall is because of the developed markets and unless you see some sort of stability coming in the developed markets, I do not think you can really see an end to this sort of a sentiment.

Source: MoneyControl