Want to deploy cash post 10% fall from highs? Be stock specific & avoid lump sum: Vinod Nair of Geojit Financial Services

Vinod Nair, Head of Research at Geojit Financial Services said that investors can start deploying the free cash in the portfolio. It should be on a stock-to-stock basis and step up in a gradual manner rather than lumpsum.

In an interview with Zeebiz's Kshitij Anand, Nair said that the broader market is weak because of the weaker performance of the Mid & Small caps which is usual amid fears. It is safer & lucrative to invest in low beta stocks. Edited Excerpts –

Q) Nifty50 has fallen more than 3.5% in the week pushing the index below crucial support levels. What led to the price action?

A) Equity was already under pressure amid high valuations, rising yields, and inflation. The unexpected full-fledged war (Ukraine-Russia) increased the dilemma of the market.  

The extent of the surprise was so high that the Russian market corrected by as much as 50 per cent on the war day. The World MSCI index was down by 3 per cent while the Indian market plunged by about 5 per cent.

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Q) India VIX climbed 31 levels on Thursday. What does the fear index tell us about future movement in markets in the coming week?

A) It tells that volatility is expected to continue in the short term. Four factors that will define the future trend of volatility are a) developments of the war, b) the US Fed rate hike plans, c) state election outcome, and d) the trend of inflation.

Q) How is market likely to trade in the truncated week? What should be the strategy – buy the dip, or hold fresh buying till market stabilizes after 10% fall from highs?

A) It makes sense to buy at dips in the coming week. Currently, we are at the lower trend of the negative channel and any positive development in a war situation will be a big relief for the market.

We can start deploying the free cash in the portfolio. It should be on a stock-to-stock basis and step up in a gradual manner rather than lumpsum.

Q) Based on February expiry – what is the kind of action you see for March series amid geopolitical concerns, rise in crude oil etc.

A) The expiry was weak due to unexpected war uncertainties. The current position on the March series is low hence the future position will be built based on future development on war, fed hike, and state elections. It has a mild positivity however it has tentativeness.

Q) Broader market underperformed benchmark indices – how should investors approach this space. Time to book profits in overvalues, high beta stocks? What are your views?

A) The broader market is weak because of the weaker performance of the Mid & Small caps which is usual amid fears. It is safer & lucrative to invest in low beta stocks.

It is not the time to book the position. For example, a broad index like Nifty500 has seen about 80 per cent of the stocks correct by a minimum 20 per cent and a maximum by 80 per cent, simple average correction is about 30 per cent from the stocks respective 52-week high.

Q) Sectorally, Oil & gas index saw a selloff in the week gone by. What led to the price action? Additionally, realty and telecom also saw a similar fall. What led to the price action?

A) Indian energy companies were heavily impacted by the high cost of crude & gas. The industry’s performance was already weak in Q3 resulting in a fall in operating profits and supply constraints.

This is expected to further continue in the coming quarters as crude prices have crossed $100. This weakness can quickly revert if the war position eases.

On a long-term basis, stocks related to gas look very attractive due to the focus on renewable energy and consistent volume growth. High beta stocks of reality & telecom were also impacted by the volatility.

(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.)