Is there more pain left?

The broader market still looks weak as the rupee is a cause for concern, but the Sensex might find some steady ground

It has been a harrowing time for stock investors and the big question that is on everybody’s mind is how much more downside is still left in this market? While the Sensex has fallen 8.9% the past month, more than 6 in 10 stocks are near their 52-wk lows as the carnage has been largely felt in the broader market. Many investors sitting on stocks are saddled with huge losses.

What's the outlook now? Experts reckon that at worst it might go down by another 5-10% as the sentiment is still weak as the currency problems are far from over. Says Chokkalingam G, managing director, chief investment officer Centrum: “There’s a bit of negative overhang still there in the indices. Though it does not seem like the markets will fall beyond 5 or 10%. The defensives are holding up one side of the market.”

Much of the selling pressure has been in the rest of the market and that is not reflected in the Sensex. Hence, experts say that the frontline indices are more likely to hold on to the current levels, though there's a downward bias due to the negative sentiments.

The big worry for the market is centred around the falling rupee and the impact it will have on the macro economy. Says Sanjay Sinha, founder and CEO, Citrus Advisors: “The rupee has gone into uncharted territory. So there will be a wide ranging impact on the macro front and on the outlook of foreign institutional investors and that is keeping the market under pressure.”

Market men have also not ruled out the possibility of a knee-jerk reaction to the events unfolding in the domestic and global economy. A panic sell-off could take the market down to 16,500 levels, say experts, but they also expect the stock market to bounce back soon after. Stock markets are still at comfort valuation. Say Sinha: “The market should find long-term support at around 17,500 levels where there’s some buying happening.”

The bigger issue that is worrying market experts is the downside probability in the broader market and not in the Sensex. The carnage in the broader market is even more severe, and experts are not confident of a recovery there any time soon. Says Chokalingam: “The appetite for stocks in the rest of the market has dried up. That's the segment that will not recover in a long time."