Russia-Ukraine war: Is volatility in the Indian stock market an opportunity for bottom fishing?

Market experts believe that while the Russia-Ukraine war will disrupt short-term trends in the markets, it is not expected to lead to a market crash. Currently, India is in a challenging position, caught between foreign institutional investors (FIIs) selling and geopolitical tensions, compounded by disappointing quarterly earnings.

The Russia-Ukraine war has intensified, with Russia now deploying intercontinental ballistic missiles. Meanwhile, foreign institutional investors (FIIs) have continued their selling spree, where the outflows has exceeded ₹39,366.9 crore this November. Despite this, the market has only corrected about 11% from its peak in September, according to experts.

Therefore, analysts anticipate the overall market to exhibit directionless movements in the near to medium term, and advise investors to take a cautious approach and remain on the sidelines, avoiding hasty decisions without proper guidance. However, India's long-term growth story remains strong, even in the face of both global and domestic challenges.

Time to buy or stay away?

The domestic benchmark indices, Nifty 50 and Sensex, experienced their best session since early June on Friday, breaking a two-week losing streak. This boost was primarily driven by easing concerns over credit risks associated with Adani Group stocks, which benefitted heavyweight financials.

The Nifty 50 surged by 2.39% to close at 23,907.25, while the Sensex rose by 2.54% to reach 79,117.11. This climb not only marked a significant rebound but also contributed to weekly gains of 1.6% for the Nifty 50 and 2% for the Sensex after a couple of weeks of declines.

Sailing through the dramatic rollercoaster ride of domestic benchmark indices, a key question arises: should investors consider buying or holding onto their stocks? Despite the overall volatility, the market's undertone remains positive.

According to Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the overall weakness in the market is an opportunity to buy stocks which are fundamentally strong and exhibiting strength. Banking and IT are strong. Digital stocks are also exhibiting strength. However, there is no scope for a sustained rally in the market, given the heightened geopolitical tensions and the relentless selling by FIIs.

“The ongoing correction, driven by valuation concerns and weaker-than-expected earnings, has created a challenging environment for investors. While valuations in some sectors have seen meaningful corrections, they may still not warrant aggressive buying across the board. However, opportunities exist in specific sectors and broader themes that hold long-term potential, particularly in areas that have experienced significant price adjustments but remain fundamentally strong,” added Krishna Appala, Sr. Research Analyst, Capitalmind Research.

Key factor to consider in the midst of correction

Arun Kejriwal, founder of Kejriwal Research and Investment Services, explained that we need to consider the performance of the Sensex in March 2020. At that time, the Sensex dropped to a low of 25,638 points. Since then, it reached a high of 85,978 points, representing a gain of 60,000 points from the initial low of 25,000.

When discussing any corrections in the market, we should view them in the context of this substantial increase. For example, if the Sensex has declined to 76,500 or 79,000, we are talking about a drop of 9,000 or 10,000 points compared to the peak of 85,000. Many investors tend to overlook that they gained 60,000 points and are instead focused on the recent losses of 9,000 to 10,000 points.

This tendency to forget the overall gains is one aspect of the current situation. Additionally, it's important to note that the market has not experienced a significant decline since hitting the low in March 2020. As a result, those who have entered the market in the past four years are facing a major correction for the first time, which is a key factor to consider.

Technical Views - Stocks to buy

Kapil Shah, Technical Analyst, Emkay Global, and Technical Analysis Trainer at Finlearn Academy highlighted that after the 11% correction from the top in 38 trading session, the Nifty 50 index took support at 23,300 level which coincides with horizontal support line and 200 days positional moving average. At current juncture, Index is at upper band of Falling channel. Potential resistance will be around 24,150 and 24,500 level and support at 23,600 and 23,300 level. Index is likely to trade in wider range with volatility but some of the stocks is at decent positional support level.

Buy Castrol India at ₹198 to 190; Stop Loss of   ₹190; Target Price of   ₹240

Buy Taj GVK Hotels at ₹329 to 315; Stop Loss of ₹300; Target Price of ₹ 390

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.