The Indian benchmark indices have been volatile in the last few trading sessions amid fast changing geopolitical situations. Indian indices opened gap-up on Friday amid positive global cues. Meanwhile, on Thursday, the stock markets were seen under massive selling pressure after the Russian President Vladimir Putin ordered military action on Ukraine. The BSE Sensex plunged 2,702 points or 4.7 per cent to 54,530, while the Nifty50 closed way below its 200-day exponential moving average (16,881), falling 815 points or 4.78 per cent to 16,248, the lowest closing level since September 2, 2021, and formed a large bearish candle on the daily charts. It was also the expiry day for monthly futures & options contracts.
“Technically, this pattern indicates a decisive downside breakout in the market. The crucial lower support of ascending trend line and 200-day EMA has been broken sharply on the downside around 16,800-16,700 levels respectively and Nifty closed lower. This also coincide with the downside breakout of triangle type formation,” says Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
Speaking on the strategy for investors in such falling markets; Parth Nyati, Founder at Tradingo said, “We are seeing the first meaningful correction in the market after a strong performance in 2021. A correction was due where geopolitical tension has become an excuse for this correction. Inflation and rising interest rates are the major concerns for equity markets and geopolitical tension is increasing the risk of inflation as energy prices are rising.”
“Anecdotally, such kinds of geopolitical issues provide a good buying opportunity for the long-term investors and we are in a structural bull run that is likely to continue for the next couple of years where intermediate corrections will be part of this journey,” Nyati added.
Falling markets provide opportunity for smart investors as well because it provides an opportunity to get quality stocks at reasonable prices. Vinod Nair, head of research at Geojit Financial Services has recommended five stocks which have passed the test of uncertain times in the past.
Tech Mahindra
Communication vertical is a major revenue contributor and expects it to be the growth driver for the company. The vertical is expected to grow with a strong pace driven by 5G. Tech Mahindra is also focusing on latest tech buzzwords like NFT, Metaverse, Web 3.0 etc. We believe the current margin pressure to offset by cost control initiatives taken by the management and further supported by a strong pace of deal wins. Amid global crisis we believe the growth in digital economy and need for high speed internet is imminent going forward and expect the company will be major beneficiary
HUL
We are positive on HUL considering its pricing power, distribution expansion and product innovation initiatives. Barring short-term pressure on margins due to input cost inflation, demand to be resilient aided by and Government of India’s initiatives to revive the economy, higher MSPs, good monsoon & sowing. Calibrated price hikes, operational efficiency, and improvement in product mix due to re-opening of markets will help to reduce margin pressure. Currently, HUL is trading at below its historical avg. and see strong upside from current level once market stabilises.
HDFC Bank
After its underperformance during the last year, the banking sector is expected to display a comeback with improved asset quality, coverage ratios and strong liquidity. HDFC Bank, being the top private bank has been outshining the industry with consistent growth and attractive asset quality. With a positive credit growth outlook, improved balance sheet and well-positioned brand name, we believe that the growth momentum will continue in the coming quarters. Currently, the stock is available below its 3-year average and hence we see strong upside potential from the current levels.
Biocon
Entry into the vaccine space, strong demand, new product launches, focus shifting towards commercializing and increase in API facilities in generics should support long-term growth prospects for the company. Since Biocon has a strong presence in the domestic and developed markets, we believe that the company will end this fiscal year on a strong growth trajectory, and we expect earnings to grow at 32.8 per cent CAGR over FY21-24E. Hence, we reiterate our BUY rating on the stock as the stock is trading at its 5 year historical average.
Tata Power
Tata Power is well focused on utilizing technology to achieve operational excellence and offer green energy solutions. The company plans to incur a capex of Rs 34 billion over the next 18 months to increase cell and module manufacturing capacity by 4GW each. Strong execution, increased order wins in the solar business and increased revenue in other segments are the key factors that will drive revenue in the medium-term. With a positive outlook, recommend to accumulate at downside as the stock is likely to trade in premium owing to Govt.’s thrust for alternative power.
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