Why long-term investors should not miss this dip? Tech, financial stocks best bet, says analyst

Domestic equity market has been trading volatile amid multiple global factors on Monday. The volatility has been such that the benchmarks Nifty50 and the S&P BSE Sensex have corrected nearly 7% each in the last one month. The broader Nifty and the 30-share pack Sensex have already corrected 6.9% each in the last one month as on February 11, showed Stock Edge data, an app to analyse NSE, BSE data. IT, Realty and small cap stocks have felt the maximum brunt of this volatility between 11 to 13 per cent during the same period.  

Meanwhile, at 1.30pm, the Nifty and Sensex were trading lower by 2 per cent as the former shed 348 points to trade at 17,026.75, while the latter dropped by over 1161.79 points to slip below 57,000 to 56,991.13. The Nifty also gave up 17,000 in the early morning trade as the 50-share index touched day's low of 16,916.55. Monday's volatile trade also left investors poorer by over 6 lakh crore, showed BSE m-cap data.  

Analysts are of the view that this volatility is largely due to Russia-Ukraine tension and weaker global cues as long-term view remains positive. They feel long-term investors have a good opportunity to strengthen their portfolios and one can invest in good quality technology and financial shares.  

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"The element of uncertainty is very high. If the Ukraine crisis aggravates into conflict, it can inflict damage to the market in the short run. The consequences of severe sanctions on Russia in the event of a Russian invasion can be debilitating for the Russian economy. This may restrain Putin from misadventure in Ukraine," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. 

He recommended long-term investors, who can ignore the present short-term gyrations, can buy high quality financials and IT stocks now.  

Mohit Ralhan, Managing Director, TIW Capital Group, also expects that tensions will get dissipated through geopolitical manoeuvres over next few weeks. But market volatility will be high during this period, says the analyst. "The market is under downward pressure due to the looming threat of war. It is likely to have a short-term impact since the risk of actual elongated war between two nuclear powers is quite limited," said Ralhan.  

Mohit Nigam, Head - PMS, Hem Securities, is also of the view that there is a short-term negative sentiments due to Ukraine-Russia crisis tensions, rising crude oil prices and US FED’s aggressive rate hike expectations due to decade high inflation.  

"The current fall in the market is due to Ukraine crisis and we may witness strong rebound in markets after easing of Ukraine Crisis. Market volatility is expected to stay at the higher end, so investors should not jump into markets for short-term gains. Rather, they should have a long-term horizon and add quality stocks in such significant dips," said Nigam. 

Strong buying interest in tech, financial shares 

Meanwhile, Mutual Funds data for the month of January also saw strong buying interest in IT and financial stocks as they spend maximum amount on shares from these two sectors.  

As per Edelweiss Fund Insight (EFI), a majority of Mutual Fund houses bought HCL Technology in January. They spent Rs 16bn (1600 crore) in January. Tech Mahindra attracted investment worth Rs 15.5 bn (1550 crore). Among financial shares, mutual funds bought HDFC the most at Rs 14.2bn (1420 crore) and Bajaj Finance (INR 13.2bn) was the other NBFC shares to attract Mutual Funds in January.