Stock market strategy: Is it time to buy, sell or hold? What analysts say

Excessive volatility is likely to continue for a few more days until clarity emerges from the crucial US Fed meeting. The market is discounting a hawkish Fed, analysts said

The possibility of faster-than-expected rate hikes by the US Federal Reserve and the simmering tensions between Russia and Ukraine have seen global markets correct in the past one week. Indian benchmarks – the S&P BSE Sensex and the Nifty50 – too have slipped around 6 per cent each in the past week. Adding to concerns in the Indian context were the rising oil prices that breached the $83 per barrel (Brent) mark to hit a seven-year high coupled with the uncertainty around the Union Budget proposals for fiscal 2022-23 to be unveiled by the Finance Minister on February 01.

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Though the sharp correction over the past few sessions has shaken investor confidence, analysts believe it is a good time to start buying from a medium-to-long term perspective. They, however, do caution against volatility and recommend buying stocks of companies that are on strong fundamental footing that have been beaten down badly in the recent carnage.

Investors, according to Dr. V K Vijayakumar, chief investment strategist at Geojit Financial Services, have to be cautious and remain defensive in their strategy. He believes there is value in high quality financials and information technology (IT) stocks, and investors can start nibbling in these segments from a long-term horizon.

“Excessive volatility is likely to continue for a few more days until clarity emerges from the crucial US Fed meeting. The market is discounting a hawkish Fed. If the Fed does sound very hawkish and indicates four rate hikes in 2022, the market will again turn weak. On the contrary, if they sound less hawkish than the market fears and indicate a dip in inflation in the second half of 2022, the oversold markets are likely to stage a comeback and see a sharp rebound on short-covering,” he explains.

Among individual stocks from the mid-and small-cap universe, Sterlite Technologies, Tata Teleservices (Maharashtra), JSW Ispat, Dr. Lal Pathlabs, HFCL, Birlasoft and NIIT have slipped between 16 per cent and 27 per cent in the last one week. Reliance Industries (RIL), Bajaj Finance, Infosys, Wipro and Larsen & Toubro are some of the large-cap stocks that have tumbled 6 per cent to 12 per cent during this period, ACE Equity data show.

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As an investment strategy, G Chokkalingam, founder and chief investment officer at Equinomics Research, advises investors to start buying the dip from a medium-to-long term perspective. “There are a lot of good quality stocks available at attractive levels. One can allocate around 30 per cent of investible funds to large-caps at the current levels, 30 per cent to large mid-caps and 40 per cent can be allocated to quality small-caps. RIL, SBI Cards, Nestle and HDFC Life are some of the stocks that look good,” he said.

As regards the Budget, analysts at BofA Securities expect any demand stimulus to be positive for consumer-related stocks, though they prefer investment / capex-related themes in 2022 over consumption-related plays.  

“Prefer L&T, HDFC Bank, ICICI Bank, State Bank of India, Bank of Baroda, IndusInd Bank, NTPC and BHEL to leverage investment theme; and Maruti Suzuki, Bajaj Auto, Havell's India, Voltas and Crompton within the consumption space,” wrote Amish Shah, their India equity strategist in a recent co-authored note.