Utilize Correction To Accumulate Quality Names
One of the most popular and common sayings of the finance world goes like this, "market take the stair up and the elevator down.” After nearly 7 days of steady stair climbing from the lows of January 6 and very little volatility, events changed drastically and there was a complete shift in sentiment on Tuesday. Overall, in the last three trading sessions, the benchmark Nifty lost nearly 600 points from the recent highs of 18,350.95.
So, what triggered this sharp sell-off in the Indian markets? Domestic bourses have been a victim of global developments over the past couple of days. The cocktail of bad news such as the Russia-Ukraine conflict, higher bond yields and elevated inflation rattled investors' confidence. The 10-year US Treasury yield jumped to its highest point in two years and UK inflation by the way has also risen to a near 30-year high in December 2021, the highest since 1992 at a figure of 5.4 per cent. Paul Dales, chief UK economist said, "It’s no secret the inflation is going to rise even further.”
In the US, the Nasdaq Composite Index booked its first close in correction territory since its November peak, moreover, it ended below its 200-DMA for the first time since April 2020. A BofA survey showed that fund managers had cut their overweight positions in tech to their lowest since 2008, while another survey by Deutsche Bank found that a majority of respondents believed US technology stocks are in buddle territory. Also, the crude oil prices surged to their highest level nearly in seven years, following reports that an explosion disrupted flow through the Kirkuk-Ceyhan pipeline between Iraq and Turkey. Moreover, crude oil prices are likely to remain firm as various factors support it. This doesn’t spell good news for domestic markets. To make matter worse, the FIIs sold stocks worth Rs 2,705 crore in the cash market on Wednesday - the largest single-day sale by FIIs in January so far. Overall, the FIIs have been net sellers to the tune of Rs 7,735 crore in the cash market so far this month. DIIs also seem to follow the pattern with FIIs for the last three trading sessions. Having said that the quantum of selling is not noteworthy.
The earning season which should have been the focal point of D-Street, amidst the above-mentioned factors has been lost in the background, however, the number from Bajaj Finance are noteworthy and hence, we would like to highlight it. Bajaj Finance reported an 85 per cent YoY jump in its consolidated net profit at Rs 2,125 crore, which is its highest ever. Furthermore, the company reported its highest-ever quarterly core AUM growth of Rs 14,700 crore during the quarter. AUM as of December 31 was up by 26 per cent at Rs 1,81,250 crore. GNPA and NNPA as of December 31 2021 stood at 1.73 per cent and 0.78 per cent compared to 2.45 per cent and 1.10 per cent as of 30 September 2021. The company’s GNPA and NNPA ratios are now back to precovid levels.
Technically, after a massive fall of 600 points, the benchmark Nifty has entered into oversold territory in the short-term time frame and we feel the zone of 17,600-17,700 is a crucial support zone for the index as the January 06, 2022 low is placed in this region. Also, the 38.2 per cent retracement level of the recent up-move from December lows is placed in this region. Hence, one should keep a close watch on this support region. We expect the market to remain volatile in the next 4 to 5 trading sessions on account of the US Federal Reserve Meet. That said, no matter how dark these next few days get, remember that there is always light at the end of the tunnel, and investors should utilize this correction to accumulate quality names.
