Broader market in a bear grip, large-caps fail to offer support

While the sell-off has had a bigger impact on mid- and small-cap shares, blue chips have also borne the brunt. Large-cap stocks including Tata Steel, Hindustan Zinc, Axis Bank, Indian Oil Corporation, ONGC, Kotak Bank, Adani Port, HUL, ITC, Avenue Supermarts, Reliance Industries and HDFC Bank, among others, have declined between 20% and 30% from their 52-weeks highs.

Some mid-cap stocks such as Ujjivan Financial, Wockhardt, Bank of India, Graphite India and PNB Housing have halved from their 52-week highs.

Unless the downward trend intensifies, analysts believe investors could look at the weakness to allocate some money to potential winners.

“The possibility of a further deep fall in prices looks limited, though volatility is anticipated in the near-term led by profit bookings, high valued pockets, and a fall in liquidity,” said Vinod Nair, head of research at Geojit Financial Services. “However, investors can start to slowly chip into good quality stocks as a decent buy opportunity from these segments, on a medium- to long-term basis.”

The Nifty is currently trading 2.5% higher than its 200-day moving average – a long-term trend indicator. When an index or stock stays above the 200-DMA, the trend is still considered bullish. About 250 of the NSE 500 stocks fell below their 200-DMAs in the recent sell-off.

“These corrections give opportunities and bring some kind of sensibility in valuations that had gone beyond understanding,” said Kunj Bansal, CIO, Karvy Capital. “As a result, these corrections give money, which was waiting on the sidelines, a chance to come into the market.”