The Indian equity market may have slipped after China devalued the yuan and gone into free fall on Monday, but it continues to outperform its Asian peers with a yawning gap.
Market experts believe that volatility will continue to persist for few more sessions led by negative global cues, constant selling by foreign institutional investors and the upcoming F&O expiry. Thus, a further fall of 1-2 per cent is likely.
However, the Indian equity market will continue to find favour among global investors and is likely to bounce back once the dust settles down. Edelweiss maintains its year end target of 32400 for the Sensex and continues to be positive on the Indian equity market as it expects a recovery in the second half of the current fiscal.
“Markets are likely to resume upward move post consolidation. Investors are downplaying the big fiscal stimulus from the commodity meltdown and are being distracted by near-term economic indicators. We also believe that evolving inflation dynamics warrant a more aggressive monetary response, which is likely to be a trigger for markets. We remain flag bearers of lower policy rates and believe the RBI is behind the curve,” it said in a strategy note. Elara Capital has revised the Nifty target for March 2016 to 9200 from 9000 for December 2015.
Dinesh Thakkar, Chairman and Managing Director at Angel Broking, believes that the fundamentals of the Indian economy remain intact.
Stay defensive The rupee, near a two-year low, has already brightened the outlook for pharmaceuticals and information technology companies; crude oil prices hitting 6.5 year low levels will help fast moving consumer goods stand firm in the chaos.
Export-driven sectors The outlook for defensive sectors remains bright. Thakkar recommends looking at export driven sectors such as IT and pharma though he also advises to pick quality names in automobiles, private banks and infrastructure. Elara Capital advises investors to play on themes such as consumption, information, communication and entertainment. CNX Pharma has been the only sectoral index staying positive though flat since August 11 with Lupin and Sun Pharmaceutical Industries gaining 6-6.6 per cent. IT and FMCG have fallen only 2-4.5 per cent.
Cyclical sectors On the other hand, cyclical sectors such as automobiles, banks, power, infrastructure, metals and realty corrected 10-18.5 per cent since August 11 not only due to subdued earnings in the first quarter but also because of no significant uptick in the outlook projected by companies in these sectors.
Vedanta, Cairn India and Hindalco Industries are the top three losers thanks to the fall in commodity prices, including crude oil.