The Indian market has been witnessing strong bouts of the volatility of late with investors selling on every rise and buying in the market after a dip of 3-4 percent.
Sensex is now 15 percent down from its all-time high of 62,245.43 which it hit on October 19, 2021. Concerns over inflation, aggressive rate hikes, the outflow of foreign funds, the anticipation of moderate global growth, geopolitical issues and uninspiring earnings have been keeping the sentiment low.
There are many headwinds for the market at present and investors look perplexed as to what to do in this market. We talked to several experts to understand for how long this volatility will continue? Here's what they said:
Deepak Jasani, Head of Retail Research, HDFC Securities
Markets are reeling under selling pressure due to the confluence of negatives which are largely global. Rising rates, commodity inflation, China Covid resurgence, supply disruption and geopolitical conflicts are all contributing to this situation. Till we have indications from global central banks including the US Fed that they are close to being done with the rate hikes, we may not see any major reversal. Continually falling prices may in fact push fence-sitting investors into profit-taking or loss-cutting mode. A sharp bounce in the interim cannot be ruled out and this again may get sold into.
Mitul Shah - Head of Research at Reliance Securities
Overall, the equity market is under pressure globally due to high inflation, higher commodity prices, and ongoing geopolitical issue coupled with monetary tightening policy by Federal Reserve. Moreover, the recent surprise 40bps hike by RBI turned sentiment negative for Indian equities. The market may remain under stress over the medium term as Q4FY22 results clearly reflect the impact of cost inflation and clear delay in capex plans by a few corporates. However, going into FY23, we expect earnings to improve with better margins by Q2FY23. We expect the war situation to normalise and commodity prices would soften by that time. Economic revival and likely reversal of FPI flow would lead to a bounce back in the Indian equity market in the second half of FY23.
G Chokkalingam, Founder & Head of Research, Equinomics Research & Advisory
Volatility will continue for maximum one-two month only. There is a structural change that is not being recognised by many. The fast growth of technology-based trading, fast spread of corporate information, speculative and fundamental news through both electronic and social media, and huge inflow of millennials led to quick reactions to execute trades. So, rewards or punishment to the markets will be very quick. The long spread of a bear market like in the past is most unlikely.
Vinod Nair, Head of Research at Geojit Financial Services
We can expect stability in the market as FII selling reduces factoring inflation and Fed policy. On the other hand, DIIs have lost their confidence after bearing continuous losses. Given the current volatility in the market, investors prefer defensive sectors like IT and pharma supported by the weakening rupee. Going ahead, the major determinant for market direction would be the pace of decline in inflation in response to the Fed measures.
Akhilesh Jat, analyst call at CapitalVia Global Research
Currently, the market is volatile and VIX is also very high which is pointing toward a huge amount of volatility. Major Indian equity indices Nifty and Sensex have declined over seven percent in May so far. FIIs are likely to continue selling in short term. At this juncture, it is expected that the fall is going to get bigger. If there is any bounce back in the market 16,300-16,500 will act as a key resistance level and on the downside, we can expect the 15,500-15,000 range.
Disclaimer: The views and recommendations made above are those of individual analysts and not of MintGenie.