The Indian market witnessed the return of volatility as after two days of healthy gains, the Sensex fell more than a percent on April 22.
Volatility Index India (VIX) climbed nearly 3 percent to remain above the 18 level while most sectoral indices witnessed significant profit booking.
The market ended in the negative for the week ended April 22. Both Sensex and Nifty fell almost 2 percent during the week while the midcap and smallcap indices slipped about a percent.
The overall market capitalisation of BSE-listed firms dropped to ₹269.64 lakh crore from ₹272.03 lakh crore on April 13, making investors poorer by ₹2.4 lakh crore during this week.
“This excessively volatile market without any clear direction is being influenced on a daily basis by external and internal factors. The external factor is the erratic movement in the mother market US where the S&P 500 and Nasdaq go up by around 2 percent one day and go down by around 2 percent the next day,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
"The internal factor influencing the market is the see-saw tussle between FIIs and DIIs. Both these external and internal factors are erratic now and that's why the market is volatile without any direction," Vijayakumar added.
The near-term outlook of the market is uncertain due to factors including the Ukraine war, elevated inflation and looming rate hikes and most analysts believe the market to remain in a range for the near term.
Why is the market volatile?
There are many short-term headwinds that are keeping the market jittery. The Russia-Ukraine war has shot up the prices of key commodities which will inflate the input cost of the companies and expert pressure on their margins. This has made the earnings outlook sombre.
Soaring inflation is another factor as it may trigger aggressive rates hikes by the RBI. The US Fed has already signalled that they want to move quickly on rate hikes to keep inflation under check. The RBI, too, said in its April policy meet that inflation is now the focus rather than growth.
While rate hikes are coming, the outlook for growth has taken a hit. Many financial firms, including IMF, The World Bank, Morgan Stanley, ICRA and Fitch Ratings, have cut India's FY23 GDP forecast, raising flags over the ongoing Ukraine war and inflation.
All these factors are keeping the market under pressure and due to occasional buying in the market, the market has been swinging both ways of late as every gain is followed by a fresh spell of selloff.
Some brokerage firms and analysts have started saying that Nifty may not see any upside this year.
"We expect markets to be sideways near term given inflation impacting volume growth and margins across several sectors. Our year-end Nifty target of 17,000 offers no upside but we prefer financials, industrials, select autos among cyclical and utilities and healthcare among defensives," said BofA Securities.
What to do in such tough times?
MintGenie talked to various analysts to understand the mood of the market and to understand what should investors do in such volatile times. Here's what they have to say:
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services
What investors should do in this time of high uncertainty is to buy high-quality stocks during steep market corrections and wait with patience.
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities
The market is highly uncertain and deals with news flows, which generally keep the market volatile.
On the domestic front, the news flow is stable while internationally the flow is highly uncertain.
It is keeping the market range-bound between the wide trading range of 16800 and 17500. Even when we look at FII and domestic inflows, we are seeing a tug of war.
Till the market is not breaking the level of 16800 we would see the market trading with a positive bias. In such types of markets, we need to be stock specific rather than sector-specific.
Santosh Meena, Head of Research, Swastika Investmart
The good part of this market is that it is not breaking down because the outlook of the Indian economy is still promising and the market is continuously getting the support of domestic money.
The long-term outlook is bullish for the market with short-term volatility therefore long-term investors should remain invested while short-term investors can maintain a stop loss of 16,500.
Investors should focus on the Indian economy facing sectors like capital goods, infrastructure, real estate, financials, consumer durable, etc.
Mitul Shah, Head of Research at Reliance Securities
The market is again negative tracking global cues amid increased tension between Russia and Ukraine.
Moreover, higher commodity prices, high inflation, the Fed's indication of a 50bps rate hike and elevated crude oil prices would continue pressure on global equities over the near term and India is no exception to this.
However, we believe that India is a better-placed nation among many global majors and we expect a strong bounce back in Indian equities once this geopolitical issue settles down in the next few months.
Investors should stay invested and buy stocks available at an attractive valuation in ongoing correction.
Animesh Malviya, Analyst at CapitalVia Global Research
Markets have remained volatile and with the current geopolitical situation, markets are deemed to be volatile in the coming time as well. We expect the market to remain volatile in the range of 16800-17400.
Investors should stay cautious in this market and buy for the long term in the correction. We believe as the geopolitical situation gets better and inflation worries calm down we expect good returns in the market.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint Genie.