Don’t panic in current market fall; ICICIdirect handpicks 40 stocks from 10 different sectors to choose from

Indian market has fallen by about 15 per cent from the recent high recorded in October 2021 largely weighed down by rise in geopolitical tensions (Russia-Ukraine war), a vertical spike in crude oil prices (touched $130/bbl), fall in the currency, selling by foreign investors, as well as sooner than expected rate hike by the US Fed due to rise in inflation.

Most investor portfolios might have dropped 5-10% in a matter of weeks, but experts feel that this is the time to hold breadth and stay put in case someone does not need cash urgently.

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Investors with a long-term horizon can look at buying quality stocks with a stable growth model to help navigate the portfolio from volatility caused by external events.

Equity benchmarks underwent global sell-off as geopolitical issues led to a surge in crude oil prices and VIX. The Nifty index breached 16800 and drifted to a six-month low of 15,671 (intraday low) on Tuesday before bouncing back.

The Nifty50 index closed with gains of nearly 1 per cent on Tuesday at 16,013. However, experts feel that the worst may not be over, and the bounce-back could merely be technical in nature as Nifty50 was trading in an oversold zone.

If geopolitical tension ease, we could see a vertical spike in the Nifty50. “Going ahead, easing of the geopolitical situation and cool off in VIX, crude oil prices post the outcome of Fed meeting, UP election would help anxiety to settle down,” ICICIdirect said in a note.

“Key support for Nifty is placed around 15400. While 16,800 would act as immediate resistance. In coming weeks, a dip from hereon should be used for accumulating quality stocks at a staggered manner,” he said.

ICICIdirect handpicks over 40 stocks which investors can look at buying on dips that include names like SBI, Axis Bank, Siemens, Infosys, LTI, Bajaj Finance, MindTree, Coforge, and United Spirits.

Historical Data:

In the last four decades, there have been three major instances of escalations due to armed conflicts. Eventually, such events have led to durable bottom formation once anxiety around the event settles down, highlighted the ICICIdirect report.

Historically, in the last four decades, there have been three major instances of geopolitical escalation mainly during 1990 to 2001 as highlighted in the adjacent chart.

In each of these instances, equity markets around the world did witness kneejerk reactions and corrected in the short term.

“However, if we look at the long-term charts, such events have led to the durable bottom formation once anxiety around the event settles down. Investing in such panic reactions with a long-term mindset has been rewarding,” added the report.

ICICIdirect expects this hypothesis to hold true even in the current situation and therefore advise not to panic rather build quality portfolios from a medium to long-term perspective.

Historically, in the past two decades, 16 out of 20 times the index bounced from the vicinity of 52-week EMA with a temporary breach of not greater than average 5% during the panic, followed by decent returns in the following three to six months.

In the current scenario, ICICIdirect expects this rhythm to be maintained as the index has slightly breached below 52 weeks’ EMA placed at 16350 along with oversold conditions.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)