Market Experts Divided Over Impact Of Sensex, Nifty Entering Bear Territory

Shares plunged deeper into a bear market in India amid concerns about the economic impact of the novel coronavirus outbreak. And this left market veterans divided over the issue.

The S&P BSE Sensex and the NSE Nifty 50 tumbled more than 6 percent intraday and have slumped more than 20 percent from their January peak, tracking the global peers that are witnessing the worst selloff since the 2008 crisis. This comes as the spreading Covid-19—that the World Health Organization declared as a pandemic on Wednesday—threatens to stall economic growth.

A price war in the crude oil market has only made matters worse.

Here’s what market experts have to say:

Saurabh Mukherjea of Marcellus Investment Managers, said the “worst has passed” as China has contained the situation. The founder of one of India’s best portfolio managers also expects supplies to resume from March.

“Cheap money and cheap oil is magic for the Indian economy and that scenario will play out for India now,” Mukherjea said. “In a call with our clients last night, we have urged them to invest even more money currently.”

• Fundamentals support buying, which is a great buying opportunity.
• Plenty of interest from western endowments to come into India.
• Foreign institutional investment outflows are not worrying.
• FIIs have pumped in $12-20 billion in India every year historically and that isn’t likely to stop in the future.

Also Read: Indian Markets Can Still Go Down A Long Way: Shankar Sharma

There is a good buying opportunity for investors at the current levels, according to Prateek Agrawal of ASK Investment Managers. “They should not rule out the possibility of a better buying opportunity if the scare increases,” the chief investment officer at the nation’s largest portfolio manager said.

• Slowdown in economy is very real and should persist for sometime.
• Companies importing various forms of energy should see a good margin growth, led by lower prices.
• Sees a margin-led EPS growth rather than volume-led growth.
• Interest rates are down globally, expects India’s Monetary Policy Committee to also cut rate.
• Though economic recovery might take time, market recovery should be quick.
• Sees less FII selling for the next few days.

Also Read: In Charts: Nifty’s Descent Into Bear Territory

Seth R. Freeman, senior managing director at GlassRatner Advisory & Capital Group, said it was a little too early to look at the markets today. “There is a room for further decline,” he said, adding this is a “serious fear environment”.

Freeman also said he was surprised by the U.S.’ move to block visitors from Europe to contain the spread of the coronavirus. India, too, suspended most visas after the WHO declared the outbreak a pandemic.

“The idea that this is about people and not trade is a misnomer. This is about trade because if people aren’t going out and travelling or buying, they are looking at losses,” Freeman said. “We are a 75 percent consumer economy and people are looking at their retirement funds and savings going down 20-25 percent in a very short time. It’s frightening.”

• Several deep value investors are looking at shale producers but I think we're not done yet.
• The effects of this is going to be lagging.
• Ultimately this is about earnings and this is going to hurt it.
• Factories in China are still largely not working. This affects auto parts and all kinds of industries.
• Can’t necessarily rely on the information about the virus coming from China.

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Vinay Khattar, executive vice-president and head of research at Edelweiss Investment, expects the economic impact of the coronavirus outbreak to be very huge. “We might see demand shocks, while we currently have supply shocks. There’s going to be a slowdown.”

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“We are advising clients to stick to very high quality stocks and avoid leverage and derivatives, Khattar said. “As volatility is extremely high, caution is buying some high quality names.”