Dalal Street corner: Selloff in metal, realty, energy stocks force benchmarks to end in red for 3rd straight day; what should investors do on Wednesday?

The Indian market ended in the red for the third consecutive day on Tuesday as sell off in metal, realty, energy, pharma and consumer durable stocks forced benchmarks to close lower amid volatility. Nifty Metal alone declined 5.2%. It was followed by the Realty index, which slumped 2.94 %. Both Nifty oil & gas and Consumer durable declined over 2% amid weakness in the benchmarks.  

A weakening rupee despite forex swaps by the Central Bank failed to lift IT stocks even after good deal wins and management commentary post-earnings, said S Ranganathan, Head of Research at LKP securities. 

"FMCG stocks saw investor interest today as Bulls attempted to halt the famous adage - Sell in May & Go Away. The Metal Index, however, played spoilsport for the Bulls and dropped over 5% today in Afternoon Trade led by Aluminium & Steel," he said  

The Indices in no way represented the damage done today in the broader markets with the Advance-Decline ratio describing the weak undertone, added Ranganathan. 

Meanwhile, underperforming, benchmark indices Nifty midcap and small cap indices ended lower by 1.8% and 2.2% in a falling market.   

"The resistance of Indian market has started to move in tandem with the world market. The support from DII & retail investors is reducing after the heavy selloff unsteadying their optimism," said Vinod Nair, Head of Research at Geojit Financial Services. 

A fall in financial liquidity is expected to slow down the economy and the pricing of equities, said Nair.  

"Oil prices are declining further on worries of Chinese lockdown, rising dollar and risk of recession. Metal stocks are losing their shine as the sector’s outlook is turning negative due to persisting margin pressures," he said.  

We reiterate our bearish stance on the markets in the absence of any positive trigger, said Ajit Mishra, VP - Research, Religare Broking Ltd. 

Participants shouldn’t read much into a single-day rebound and wait for some decisive reversal signal, said the Religare Broking VP.  

"Besides, stability on the global front is equally critical for any sustained move. Meanwhile, since most of the sectors are trading under pressure, the focus should be on stock selection and using intermediate rebound to create shorts," he added.  

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, also warned retail investors against making any hasty decision to buy at current junctue.  

Retail investors should not rush in to buy aggressively now since the market is not at buyable valuations, he said.  

"Since there is a risk off environment globally, FIIs are likely to sell at every bounce in the market. High quality stocks like leading financials may be bought in small quantities. Rupee depreciation, which may continue, will impart resilience to IT stocks," he added.