Sensex, Nifty 50 see sharp 3% decline: Experts turn cautious, advice investors to be watchful

Stock Market Today. The Global equity market meltdown extended to India on Monday as the benchmark index as Nifty 50 and the Sensex saw sharp correction of more than 3%

The Market fall

The Nasdaq and the S&P already has lost 3.2% in 2 trading days, despite the federal reserve decided to hold interest rates, highlighted experts. Various data like the declining US job creation in July and the sharp rise in US unemployment rate to 4.3% all have added to concerns on US economy slipping to recession and while markets were expecting soft landing, the thesis now remains under threat.

The Escalating tension in the middle-East, The weaker than expected earnings reported by the companies in the US, the mixed set of results being declared by domestic companies have added to market concerns. Another important factor remained the Japanese market being hammered due to the unwinding of the Yen carry trade. Most of the Asian markets saw sharp corrections.

On Monday, several regional equity indexes faced significant declines, with Japan and the tech-focused markets of Taiwan and Korea experiencing the heaviest losses, each seeing their benchmarks drop by more than 7%, said Tanvi Kanchan, Head-UAE Business and Strategy, Anand Rathi Shares and Stock Brokers. The MSCI Asia Pacific Index fell by as much as 4.3%, heading towards a technical correction and threatening to wipe out all its gains for the year, added Kanchan.

Trideep Bhattacharya, President and CIO-Equities, Edelweiss Mutual Fund on the other hand said that Equity markets are reacting to economic weakness, highlighted by disappointing earnings from a few U.S. consumer-focused companies.

This sell off however is considered by Kanchan as more of a short term volatility by way of profit booking and is no indicator of any long term panic mode set in the Indian equities.

For investors looking at entering the equity market, a staggered entry during volatile periods can be considered said Kanchan.

Experts turn cautious and advice investors to remain watchful

Deepak Jassani , Head of Research at HDFC Securities said that the market after steep fall have made a temporary bottom. We need to watch for the recovery and if the recovery is sluggish, it would mean that there could be more legs of correction. One cannot ignore the fact that market has fallen sharply and with high volumes. Investors needs to remain watchful over next few sessions, feels Jasani. In the backdrop some some amount of profit booking can also be considered by investors.

A key factor that regularly has been highlighted by experts is the high valuations. The sustained liquidity had been supporting valuations. But valuations have remained stretched and particularly in the mid and smallcaps segments , said experts. The overvalued segments of the market like Defence and Railways are also seeing pressure intensify. The buy on dips strategy which has worked well in this bull run, is likely to be threatened now, said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.. Investors need not rush to buy in this correction and Vijayakumar also advices investors to wait for the market to stabilise.

"Sharad Chandra Shukla, Director at Mehta Equities Ltd also is of the view that the uncertainty in U.S. economic data and global political instability further exacerbate market volatility, prompting widespread reassessment of investment strategies.

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