What’s your gut feeling? Time to buy, India out of place in this rout


Stocks may be falling like there is no tomorrow. Dalal Street is simply giving in to the momentum seen globally. But in its own courtyard, the story appears to be completely different from the rest of the world.

This morning, even as the Sensex tanked nearly 600 points, there were fewer doomsayers on Indian business TV channels. More analysts said buying on dips could be a better strategy when it comes to the Indian market.

That, when Jim Rogers, the global market veteran, said the next bear market in stocks would be more catastrophic than any other market downturn that he's lived through.

The BSE Sensex is down 2,400 points, or 6.65 per cent from its all-time high of 36,443 to hit an intraday low of 34,017 on February 9. BSE Midcap and Smallcap indices are down 9 per cent and 10, respectively, from their peak levels.

It is time to buy stocks (in India) provided you have a slightly longer time frame, said Manish Sonthalia, Motilal Oswal AMC.

"The market can fall 10% to 15% anytime. We should not be fixated about to what levels it comes up or goes down. If earnings' growth does come about, they will reflect in the prices. We are clearly in an upturn as far as the earnings cycle is concerned. So, leave aside global markets. Earnings growth is our truth and that will get reflected in individual stocks," Sonthalia said.

Besides signs of earnings revival, many other macro indicators look promising and are giving confidence to analysts.

The fortnightly Macro Dashboard released this morning by BNP Paribas Mutual Fund showed multiple signs that the Indian economy is fighting fit.

  • Broad money growth bodes well for economic activity
  • Resilient retail credit demand now supplemented with working capital demand
  • Banks need to raise deposit rates to finance rising credit growth
  • Govt bond yields on the rise on account of higher than expected fiscal deficit, rising inflation and higher government borrowing
  • Owing to weak base from demonetisation, cement production posted a high growth
  • Manufacturing PMI eased in January, after reaching a 66-month high in December 2017. Services PMI continue to improve showing signs of revival
  • Weak base from demonetisation spiked up total auto demand
  • Pickup in petrol and diesel consumption
  • Revival of coal imports and steady numbers from containers
  • Trade deficit widened to a three-year high to $14.88 billion due to gold and oil imports
  • Both CPI and WPI are inching upwards, keeping RBI hawkish. We expect rate hikes in H2CY2018

After this (selloff) impact, whatever we have seen in Asia, the (Indian) market will decouple from the US, said Sandeep Tandon of Quant Broking.

"It might take two or three months. It is very difficult to pinpoint exact time lines, but India will decouple from the US market. So buying on dips strategy should work for India, which is not the case for the US. But if you look at it, the fear index is still spiking. Maybe Nifty can correct another 300-400 points from these levels. So may be 10,200-10,300 can be tested. One should be a buyer from a longer-term perspective at a level around 10,300," Tandon said.

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