Stock market falls over 6% in one month! Is it the right time to be greedy?

The Indian market has been witnessing extreme volatility for the past couple of weeks. This week the market managed to close in the green on two occasions, including on one on May 16 when the benchmarks settled with gains of over two and half per cent.  It ended marginally lower on Wednesday, while has corrected more than 2.5 per cent around 3 pm on Thursday.  

Overall, in the past one month, as on May 19, the broader Nifty50 and the Sensex have corrected by more than 6.5 per cent.  

Metal indices have been the biggest losers so far on the two exchanges, NSE and BSE, correcting between 17% to 19% in the past one month. Besides, indices related to media, realty, consumer durables and small cap declined between 14-16% as on May 19.  

On Thursday, IT and metal stocks were seen under massive selling pressure as Nifty IT dropped over 6% and Metal declined more than 4% as all sectoral indices bled.  

The massive decline in IT shares came on the back of JP Morgan report, which downgraded the sector to "underweight".  

"Soaring inflation, supply chain issues and the hit from the Ukraine war will bring an end to the growth boom India`s IT services industry enjoyed during the pandemic," said J.P.Morgan in its report. 

The $194-billion sector whose software services helped businesses adopt to pandemic-era practices of online shopping and remote working is facing a demand slowdown this year as employees return to offices and the Russia-Ukraine war weighs on spending from clients in Europe, it added 

Meanwhile, ITC and Dr Reddy's were the only stocks that gained on the benchmarks as all the others slipped in the red.  

Speaking of Thursday's sharp correction, Parth Nyati, Founder, Tradingo, said global inflation has become the biggest spoilsport and has derailed the economic growth recovery globally. The post-pandemic inflation which was once believed to be transient has now become an entrenched one, he said.  

However, he said this volatility could be used to add good quality stocks to the portfolio.  

"We believe that investors must be greedy when others are fearful and use this opportunity to lap up quality shares with good growth prospects and reasonable valuations," said Nyati.  

Vinod Nair, Head of Research at Geojit Financial Services on Wednesday said that with prospects of a sizeable interest rate hike by the global central banks, investors are advised to allocate higher weightage to sectors that are least affected by such policies such as defensives