More Weakness Likely in Stock Markets
Among other laggards, Mahindra & Mahindra lost 3% to end at Rs 1,346.35 while Reliance Industries fell 2.4% to Rs 1,546.55. Rising tensions between US and North Korea have raised worries of a war between the two countries. US president Donald Trump’s warning came after Pyongyang announced it will have a plan ready by mid-August to fire four rockets into waters near the US territory of Guam. Trump said he may not have been tough enough in his earlier warning to North Korea that the country will face “fire and fury like the world has never seen” if it did not give up its nuclear ambitions.
In latest developments, Trump tweeted that “military solutions are now fully in place, locked and loaded, should North Korea act unwisely. Hopefully Kim Jong-un will find another path!” Money managers said the rise in rhetoric means that the markets are in for some more weakness. The Securities and Exchange Board of India’s directive on suspected 331 companies has also fuelled volatility in domestic markets though the Securities Appellate Tri- bunal has given relief to some companies since the directive was released late Monday. “We have been seeing a one-way move for the last two-three years with hardly any major correction except during the post-demonetisation period. Given the global tensions, short-term volatility cannot be ruled out,” said Vinit Sambre, fund manager, DSP BlackRock.
“We will use this opportunity to deploy cash where prices have corrected to reasonable levels,” said Sambre.
Indian markets have retreated from record high levels but they are still up 18-19% for the year 2017. Yogesh Radke, head of alternative and quantitative research at Edelweiss Securities sees scope for another 100 points fall in the Nifty.
“The market (Nifty) may head to 9,600 and we expect the index to languish around that level before moving up again. 9,800 will be the interim resistance,” said Radke. The outlook for mid-and-small-cap stocks appears grimmer as stocks in these spaces are still overvalued.
“Market is likely to weaken further, particularly mid and small caps. A correction of 5-10% is likely in mid-caps,” said Jyotivardhan Jaipuria, founder, Veda Investment Managers.