The Finance Minister’s (FM) commentary or the weak monsoon may be easy targets to blame, but the inherent structure of the market which has entered into a bearish phase is causing the fall, Umesh Mehta, Head of Research, SAMCO Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Another week of the muted performance from Indian market where Nifty broke below crucial support levels in a matter of two days. Disappointment from FM comments weighed on markets. What are the factors which are weighing on Indian markets?
A) The weakness in macros and slowdown at the ground level is really taking the markets lower given the valuations are still at higher levels.
FM’s commentary or the weak monsoon may be the easy targets to blame but the inherent structure of the market which has entered into a bearish phase is causing the fall.
Q) What are the important levels to watch out for in the coming week considering we have F&O expiry as well?
A) With the earning season picking up pace and F&O expiry next week, the 11,300 level should be closely watched for Nifty. This is an important support level, and if breached, it can add to a further decline in the bourses.
Q) The broader market has underperformed in the week gone by with more than 350 stocks hitting a fresh 52-week low on the BSE. Do you see the underperformance to continue as earnings have failed to lift sentiment?
A) Yes, the fall will continue as the earnings season has failed to impress the market this quarter due to the slowdown in multiple sectors.
Only certain pockets of select few businesses such as cement, AMCs are expected to report good quarterly numbers, otherwise, there is weakness all around.
Q) What should be the ideal strategy of traders for the coming week — wait and watch, or buy on dips?
A) As the weakness is expected to continue, ‘sell-on-rally’ should be an ideal strategy for traders in the coming week. Investors, on the other hand, may consider raising some cash from their portfolio.
Q) Is it time to cherry pick from this market? What are the important factors which investors should watch out for before catching a falling knife?
A) The Nifty has time and again disappointed the Street and the macros are also not lifting its sentiment either. In the midst of so much negativity, it is best to wait rather than jump into any stock.
There is still some room for further declines. Investors should look at returns on equity (ROE), free cash flows, exposure to debt, promoter pledge, operating efficiency, and other fundamental factors before catching a falling knife.
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