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Caution! Steep fall ahead, say brokerages

NetScribes/Pallavi Rao

It's Friday Fury all over again. Not to mention March mayhem. Four consecutive Fridays of sharp declines have completely taken the wind out of the stock markets.

Investors (both retail and institutional), local operators and mutual funds now stand battered, waiting on the sides of the battlefield. Amidst latest news of Ketan Parekh's interrogation by the CBI, fund managers and brokerages have one advice for investors: Stay away.

Despite most stocks being at their 52-week lows and attractive valuations, most of the leading mutual funds are totally cash-strapped and, therefore, unlikely to make any fresh investments in the next two weeks.

Foreign institutional investors (FIIs) are, however, expected to come back to the markets by mid-next week with select buying across most sectors.

The BSE Sensex has recorded huge falls during each of the last four weeks. On March 9, it dipped 174.98 points to 3881.96 levels, following reports of a payment crisis on the Calcutta Stock Exchange and a Sebi probe into the short sales exercise.

On March 16, it suffered the aftershocks of the Tehelka developments. Last Friday, it was hit by reports of IT raids on six brokers involved in the bear hammering.

The Sensex ended March 30 at 3604.38, down 147.18 points from the previous close of 3751.56, amidst news of Ketan Parekh's arrest by the CBI in the Madhavpura Bank case.

In this scenario, even a strong Nasdaq is unlikely to boost sentiment over the next two weeks. Most market players suggest a 200 points fall for the Sensex from current levels.

Vallabh Bhansali of Enam Financial said the slide could continue over the next few days. "In this scenario, holding onto stock is the best option...value investment will be seen once the markets stabilise,'' he said.

"There is little in terms of a support level. Sentiments are very bad. Even a Nasdaq rise will not help us," said Baldev Chawla, senior research analyst, Motilal Oswal Securities.

Leading mutual funds Prudential-ICICI AMC, SBI Mutual Fund and Kotak Mahindra have recommended a cautious approach while investing in the markets. Sun F&C AMC has suggested a hold on all investments, while Kotak Mahindra has been involved in selling at the markets.

"The Sensex will dip another 200 points amidst panic. We do not expect redemptions now and people are probably aware that the market will soon bottom out," said Divya Krishnan, head of investments, SBI Mutual Fund.

"We will increase our cash levels by around 2-3 per cent. Selling is the alternative now because the market will plummet further," said SN Rajan, head of investments, Kotak Mahindra Mutual Fund. "After Tuesday, we may see a slight rise, provided the FIIs buy big," he added.

Nikhi Khattau, CEO, Sun F&C, said the markets could see a further slide and the best option was to hold onto stock at current levels. Sun F&C and Kotak are both almost fully invested at this juncture but their fund managers have said that a bottom-up approach to investment should be followed.

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