Markets dip on N. Korean crisis
Signals of short-term trend reversal seen
However, if the geo-political tension escalates further, we could see steep correction in the markets — AMBAREESH BALIGA, Senior research analyst
The equity markets continued with their losing streak for the third day amidst weakness in global stocks as risk averse investors pulled out money from the markets and moved towards safe haven assets such as gold and US treasury bonds in the wake of mounting tension between US and North Korea.
The fall witnessed over the last few days according to market participants is signalling towards a short-term trend reversal in the market.
The Nifty slipped below the 9,900 level in the intra-day trade before ending the day at 9,908.05, losing 70.50 points or 0.71 per cent. The Sensex fell 216.35 points or 0.68 per cent to end the day at 31,797.84.
The small- and mid-cap stocks were hammered on Wednesday leading to over 2 per cent drop in the BSE small- and midcap indices in the intraday trade.
“We will have to wait and see how the markets move in the next 2-3 trading session to confirm whether this is a shortterm trend reversal. There are many investors with cash waiting on the sidelines to enter the market. So there is also a possibility of markets bouncing back from lower levels,” said Ambareesh Baliga, senior research analyst.
“It may not be a one way street. However, if the geo-political tension escalates further, we could see steep correction in the markets,” he added.
On Wednesday, FPIs offloaded shares worth `841.44 crore. The risk aversion led to a spike in the prices of gold in the international market by over 0.6 per cent to $1,267.79 per ounce. In the domestic market, the standard gold (99.5 purity) soared `140 to close at `28,580 per 10 gram.
“About two third of small- and mid-cap companies are over valued. They are likely to see further selling in coming days. On the other hand, markets are expected to consolidate before making their next move,” said Mr G. Chokalingam, founder, Equinomics Research & Advisory.
Meanwhile in Asia, Nikkei 225 fell 1.29 per cent while Kospi index dropped 1.10 per cent. Most of the European equity indices also traded deep in the red with over 1 per cent losses.
Mr Sanjeev Zarbade, VP at Kotak Securities, said that the improving fundamentals of the Indian economy is providing greater confidence in the medium to long term potential of Indian equities.
However, in the context of Sebi’s move regarding the 331 companies suspected of being shell companies, he feels investors should consider companies with good corporate governance and strong balance sheets.