Fundamental and technical analysts see room for further correction in the market in the future.
Gaurav Dua, Senior Vice President, Head of Capital Market Strategy and Investments, BNP Paribas Sharekhan, said: “We see scope for a 3% to 4% drop from the current level before things stabilize and markets find a durable short-term fund “. However, it suggests that investors should buy quality stocks like ICICI Bank, Infosys and Cipla in the event of a further decline.
Heavy selling in banking and IT stocks weighed on national indices on Thursday, as hopes for further stimulus in the US and a resurgence of new coronavirus cases weighed on sentiment globally.
Chartist Aditya Agarwala, a senior technical analyst at YES Securities, said Nifty formed a huge bearish engulfing pattern on the daily chart on Thursday. Also, on the weekly time frame, the index is forming a dark cloud cover pattern, signifying a weakening of the uptrend. A bearish engulfing pattern is considered as a bearish reversal pattern, which generally occurs at the top of an uptrend.
US stocks also fell on Thursday as an unexpected spike in weekly jobless claims exacerbated fears of a stalled economic recovery. Treasury Secretary Steven Mnuchin dashed hopes of more fiscal aid before the election. The Dow Jones Industrial Average Index fell nearly 200 points to 28,314 in early trading.
Vinod Nair, Head of Research at Geojit Financial Services, said: “The market had moved up with the expectation of a great stimulus, but the desired fiscal package was not announced in India and a delay in the United States and the euro has changed. the tendency. At the same time, the pace of economic recovery is under pressure due to the resurgence of high rates of Covid infection, escalating to high economic restrictions. ”
He also added that the safety margin is low given premium prices and a slowdown in the economic recovery. The trend going forward will depend on the support measures announced in the context of the stimulus and comments on the second quarter results.
In valuation terms, the domestic equity market does not see itself in a comfortable zone. The 30-share index traded at a price-to-earnings ratio of 29.10 versus its long-term 10-year average of 20.93 times. The 30-share Sensex Index and the 50-share Nifty Index had advanced 7 percent between Sept. 29 and Oct. 14.
Kranthi Bathini, investment advisor at Wealth Mills Securities, said: “Technically, the market looks weak. The Nifty level of 11,200 is a key to keep in mind in the medium term. The domestic equity market may decline in the event of further weakness in the US market. ”
The NSE Nifty Index closed at 290.70 points, or 2.43 percent, Thursday at 11,680. With the exception of Asian Paints (up 0.32 percent), 29 other components on the Sensex came out in the red, with Bajaj Finance falling the most by 4.68 percent. Tech Mahindra, IndusInd Bank, ICICI Bank, State Bank of India, Reliance Industries and Bharti Airtel each got between 3% and 5%.
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