The Indian equity markets are currently undergoing a significant correction, with more than 50 percent of stocks across major indices falling below their crucial 200-day moving average (DMA). This has raised concerns among analysts, who are advising caution to investors.
The recent downturn has seen around 75 stocks in the Nifty 500 index decline by over 20 percent from their peaks as of September 27. Foreign investors have also contributed to the selling pressure by offloading over Rs 94,000 crore in October alone. The Nifty MidCap 100 and SmallCap 100 indices have also experienced declines exceeding 20 percent.
Analysts note that stocks falling below the 200 DMA often enter a weakened state, but fundamentally strong companies may find support at this level. The recent correction in the Indian markets has been attributed to disappointing earnings for the September quarter and expectations of the Reserve Bank of India maintaining interest rates amid persistent inflation. The geopolitical landscape, particularly concerns about the US-China trade war, has also contributed to the bearish sentiment.
Despite these challenges, some analysts believe that India could benefit from the ongoing geopolitical tussle. Technical analysts are closely monitoring key levels, with the Nifty potentially testing the 23,200 mark. The relative strength index (RSI) is currently in oversold territory, indicating a potential rebound. Investment experts advise a strategic approach to stock selection, focusing on stocks with higher volumes and larger market capitalizations. The current correction is seen as an opportunity to accumulate fundamentally strong stocks, with the 200 DMA considered a pivotal point for potential buying opportunities.
Foreign investment trends are closely monitored as they significantly influence market sentiment and stock performance. The outlook for the market remains uncertain, with factors such as geopolitical tensions and economic indicators playing a crucial role in shaping market direction. Investors are advised to stay informed and consider a diversified approach to mitigate risks associated with market volatility.