The Sensex and Nifty made a smart recovery after falling 0.5 per cent on Monday. The rupee also pulled back below 67 per dollar after slipping below the psychological mark in morning deals. The volatility in markets comes ahead of the Federal Reserve meeting this week in which the US central bank is likely to decide on raising rates for the first time in nearly one decade.
The likelihood of a rate hike in the US has proved to be big drag on global markets and currencies. In India, the Nifty has shed 325 points or 4 per cent to a three-month low in December, while the rupee is trading at over two-year lows.
Selling in domestic markets has been led by foreign institutional investors, who have sold equities worth around Rs 5,000 crore this month. In November, FIIs had sold shares worth over Rs 7,000 crore in the domestic cash market.
The sharp selling has dented investors' sentiments, but experts are advising investors to use the weakness in markets to buy good quality stocks for long term.
Advising retail investors to not panic, G Chokkalingam, founder of Equinomics Research & Advisory said, "The domestic factors are giving lot of comfort. India is likely to grow at 8 per cent over the next 1-2 years. 2016 will be great year to make money in quality stocks."
TS Harihar, chief executive and founder of HRBV Client Solutions told NDTV Profit that the Nifty is likely to find support at 7,500.
Mr Harihar sounded optimistic about domestic markets, though he cautioned that it would be futile to expect a sharp recovery. He expects markets to consolidate for a few months and says a pick-up in corporate earnings will lead to sustained momentum in markets next year.
Fund manager Sandip Sabharwal said the Nifty's 4 per cent fall this month is the second largest for any December since 2011. He also expects markets to fund support at 7,500.
In the last 20 yrs worst Nifty fall in December 4.3% in 2011 We are down 4% for the month this year Double bottom around 7540 should hold— sandip sabharwal (@sandipsabharwal) December 9, 2015
As of 10 a.m., markets traded off the day's low, with the Sensex trading 50 points or 0.2 per cent down at 24,990, and the Nifty trading 0.1 per cent lower at 7,600.
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