Domestic brokerages say 'buy on dips'

After a spurt of reform measures by the Centre and quantitative easing steps announced in the US, domestic brokerages are advising clients to keep buying whenever the market corrects.

Broking firms are positive on market prospects in the medium term. However, they believe there would be several buying opportunities in the coming months.

“Overall, it seems the government is breaking out of the policy inertia that has lingered since late 2010. We believe more action would follow in the near term,” Nischal Maheshwari, head of research at Edelweiss Securities, wrote in a strategy note to clients. “Accordingly, we are changing our stance from ‘sell on rise’ to ‘buy on dips’, as we anticipate several buying opportunities in the coming months, as earnings disappoint in the second quarter of 2012-13 and concern on the global economic scenario intensifies.”
 

BROKERS’ VIEWs 

Edelweiss
Buy on dips

Sharekhan
Buy on corrective pull-backs

Angel Broking
Maintain a stock-specific and value-buying approach

Prabhudas Lilladher
Activity to pick up in mid- and small-caps

Retail-focused broking firm Sharekhan, too, suggests there could be buying opportunities at lower levels. It is advising clients to buy on corrective pull-backs. “In the absolute near term, the equity market could give up some of the recent gains, owing to profit booking and growing domestic political uncertainties. However, we believe the bias remains positive and the probability of the benchmark indices breaking out of their range has increased substantially,” Sharekhan analysts told clients.

Back-to-back reforms, including a rise in diesel prices and opening up sectors like multi-brand retail and aviation to foreign direct investment (FDI), were cheered by the market, with the Sensex rising over 500 points in just two days. Yesterday, the Sensex closed at 18,496, while the 50-share Nifty closed at 5,600.

However, given the volatility in the market and the declining retail volumes, retail investors may not have benefited from the rally. The participation of retail investors in the equity market is languishing at multi-year lows.

Mumbai-based brokerage Angel Broking is advising clients to maintain a stock-specific and value-buying approach to yield better returns. “Among rate-sensitives, we prefer private banks and select infrastructure and real estate stocks…also, quality stocks in export-oriented sectors like information technology. Our top picks include select mid-caps and reasonably valued defensive stocks,” the brokerage told clients.

Angel Broking has set a 12-month target of 20,400 for the 30-stock Sensex, owing to the recent improvement in global and domestic outlooks.

Ajay Bodke, head (investment strategy & advisory), Prabhudas Lilladher, believes the feel-good factor in the market is likely to continue. He adds the Nifty has the potential to rise to 5,800 levels.