Investors’ confidence on buying stocks has been shaken, as fears of a double-dip recession in the US and a seemingly worsening euro zone debt crisis continue to weigh on global markets.
The Bombay Stock Exchange’s benchmark, the Sensex, which closed down 0.4 per cent at 17,059.40 on Thursday, has lost nearly 10 per cent since the Reserve Bank of India (RBI) raised its key policy rates on July 26. The drop since then has wiped off investors’ wealth worth Rs 5,93,176 crore, data compiled by the BS Research Bureau showed.
Experts believe the worst is not yet over and there is possibility of further downside. Domestic brokerages are advising clients to remain cautious and protect their capital. “These are uncertain times. We are telling clients that protection of capital should be their first priority,” said VK Sharma, business head, private broking and wealth management, HDFC Securities. “Globally, things are not going to improve soon. It will be a long-drawn process.”
Investors are in a “wait and watch” mode and are in no hurry to invest, brokerage officials say. “People are a little confused. We are just responding to global developments,” said Ajay Parmar, head of research, institutional equities, at Emkay Global Financial Services. “In the short term, investors should look at putting money in bank fixed deposits and debt schemes of mutual funds.”
Investors can make nine to 10 per cent annual return by putting money in bank fixed deposits or debt schemes of mutual funds.
“Retail investors are fearful. They are not confident enough to buy stocks, as traders in India have an upper hand due to cash-settled derivatives,” said Deven Choksey, managing director at KR Choksey Shares & Securities. “We are advising clients to act whenever there is a situation of panic. Otherwise, you can’t make money,” he added.
Though valuations have become cheaper, brokerages are advising clients to wait till there is clear visibility. “It is too early to buy in the current decline, as the probability of a double-dip recession in developed markets and a hard landing in India has only risen; the spillover impact is yet to pan out,” Dhananjay Sinha and Girish Pai, strategists at Centrum Broking, said in a note to clients. “We believe the Sensex should trade in the range of 15,500-19,800, with a bias towards the lower end of the range in the next six months.”
