Broader market crash may get deeper

The screeching halt in equity rally has taken investors by surprise. After starting the new calendar year on a solid note, market participants are looking for cover ahead of the US Federal Reserve’s policy meeting.
The Federal Open Market Committee is due to meet on Tuesday and Wednesday to decide on the next steps for US monetary policy.
Fears that the policy could be hawkish and potentially outline the case for interest rate rises starting in March has spooked riskier assets.

Given this, benchmark indices crashed 2.6 per cent yesterday, wiping off all the gains logged, so far, this year. The BSE Sensex plunged over 1,500 points while the Nifty50 gave up the crucial 17,150 level.
With this, the indices have broken below their key support levels, indicating a wild ride ahead.

The pain in the broader market is more severe, which is a cause of concern. The Mid Cap and Small Cap indices on the BSE have cracked 8 per cent each in a week.
Individually, Spandana Sphoorty, Vodafone Idea, Max Healthcare, PI Industries, Info Edge (India), Mindtree, PTC India, Havells India, Tech Mahindra, Mphasis, and Aurobindo Pharma are some of the stocks from the mid- and small-cap segments that have lost between 10 per cent and 28 per cent this far in 2022.
 
At present, 221 stocks in Nifty 500 – nearly 44 per cent – are trading below their respective 200-DMA with Apollo Tyres, Finolex Cables, Jindal Steel & Power, Wipro, Godrej Properties, Adani Ports and Special Economic Zone witnessing intense selling pressure.
And if the global sell-off continues, marquee names like Ambuja Cement, Axis Bank, BPCL, Divis Labs, HDFC Bank, HDFC, Hero MotoCorp, HUL, SBI Cards, Wipro and Tata Steel may see aggravated selling.

As uncertainty around the tightness in the policy along with upcoming expiry and the Union Budget could keep the space volatile, analysts advise investors to stay away from the mid-and small-caps for now and use the market fall to buy large-caps.
 
That said, Jitendra Gohil, head of India equity research at Credit Suisse Wealth Management doesn’t anticipate India’s valuation premium to materially de-rate in the near-term given marked improvement in macro fundamentals and strength in corporate balance sheet.
Currently, he continues to maintain a moderate overweight position in midcaps.

As regards today, investors will eye the two-day meeting of the US Federal Reserve, bond yield and oil price movement, and news flow around likely Budget announcements.
That apart, Q3 earnings of Cipla, Maruti Suzuki, Lodha Developers, and 60 other companies will also be tracked by the markets.

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