Stock market crash: Experts divided on whether there’s more pain ahead
Mumbai: Market participants are divided on whether there is more pain in the offing after the meltdown in world equities. A few feel that market should stabilize over the week, but some were of the opinion that there could be more turmoil in days to come.
Investors are still trying to digest the developments and probably relooking their portfolio to limit losses. Indian markets were following the rout in world equities, and are likely to take more cues from them in days to come.
The benchmark Sensex index slumped nearly 1,274.35 points to 33,482.81 points, while Nifty declined 371.40 points to 10,295.15 in intraday trade, tracking global selloff. Here is what experts had to say on the market crash.
Andrew Holland, chief executive officer, Avendus Capital Alternate Strategies
Unfortunately, investors did not get cautious on global liquidity earlier. Ironically, the global market crash is actually backed by good news—the strong US jobs data.
The biggest bull market in recent times was backed by complacency. Now, bond yields are rising higher, inflation seems to be firming up more than expected before. So we now have a scenario where fixed income could be yielding better than equities.
I think a fall of another 3-4 % is reasonable. Could it overshoot? Yes, it can. People have just woken up to a problem, and now panic has set in.
We need to probably see how the market fares for the remaining week to see if the fall deepens or pulls back.
Global growth is fine. I am okay with India’s valuations too after the fall. The expectations from the Indian market have come off after the rally we have seen last year and through January.
Indian markets will follow global cues for now. So it is a wait and watch for them.
Ritesh Jain, chief investment officer at BNP Paribas Mutual Fund
Indian markets are mirroring the freefall in world equities. The fear of inflation firming up and hardening bond yields led to increase in US VIX and sent the US market spiraling down, with momentum strategies adding to the domino effect.
We have turned completely from greed to fear and hopefully, the fear should settle down without any systemic damage. It’s a wait and watch situation until then.
Hertta Alava, director of emerging market funds at FIM Asset Management Ltd in Helsinki, Finland
As the correction happened so fast, I think there is still a bit more weakness ahead. I’m not worried about the macro economy, but I’m worried about the technical selling pressure because there have been so many investment strategies based on low volatility.
Also emerging markets could face some outflows, because a big part of the recent inflows has gone to ETFs (exchange-traded fund). But fundamentals in emerging markets are still quite good, so there could be a buying opportunity soon.
I think equities are still attractive compared to other asset classes. I think this crash is a good reminder, what are the risks in more exotic products like these ETFs shorting volatility or cryptocurrencies. Also there is lot of institutional money invested in more illiquid alternative investments, which could become a problem at some point.
Gautam Duggad, head of research, Motilal Oswal Institutional Equities
The market is reacting to global cues and hardening of bond yields across markets. In a strategy report, published a fortnight back, we had highlighted that the market was looking expensive on our excess RoE vs P/B (return on equity versus price to book ratio) framework and with higher cost of capital, the valuations had a room to correct, especially in mid-caps.
The fact that we did not have any significant drawdown in CY17 is making the current correction look more ominous than it is. However, with earnings recovery—Q3 FY18 earnings are in line so far—panning out, we believe the correction is offering a good opportunity to buy from a 2-3-year perspective.
Our preference continues for large-caps over mid-caps as Nifty valuations at 17-17.5x FY19 projected EPS (earnings per share), while not inexpensive, is not out of whack either.
Gopal Agrawal, chief investment officer - equities, Tata Asset Management Co. Ltd
I don’t think there is a lot of pain in the offing for Indian markets. Valuations were rich, but post the correction, valuations of many quality stocks have become reasonable.
I think it is time to buy.
Oil prices seem to have peaked out, so on the macro front too, I think that should not be much to worry about.