Over half of Nifty500 stocks dip below their 200-DMA. Is the fall overdone?

The fresh sell-off on Monday pulled another 37 stocks below 200-DMA taking the total tally to 268

Markets have mostly been on a downward spiral since last week when the US Federal Reserve (US Fed) hiked rates by 75 basis points – the third such hike in 2022. The S&P BSE Sensex and the Nifty50 have tumbled over 1 per cent each since then, and have turned negative in 2022 as regards the overall returns.

The selling, technical indicators suggest, has dragged 268 stocks (over half) that comprise the Nifty500 index below their respective 200-day moving average (DMA). For long-term investors, the 200- DMA provides a broad outlook of the underlying trend in a stock or an index. Traders prefer stocks that are above the 200-DMA, since they tend to perform better. 

That said, the recent selling, analysts believe has been overdone as investors pressed the panic button after the sharp rate hike by the US Fed hiked. The Indian markets, they said, are still a ‘buy on dips’ from a medium-to-long term perspective.

“The selling in the Indian markets is overdone. Indian markets have been penalised a lot for the problems that have originated in foreign land. While most rating agencies have lowered GDP growth estimates for India, it will still be among the fastest growing economies globally. A fall in oil prices, a good monsoon with a healthy kharif crop, too, will aid sentiment. With the latest round, the US Fed has crossed 65 per cent of the targeted rate hike. Investors should use the market correction to buy quality stocks,” suggests G Chokkalingam, founder and chief investment officer at Equinomics Research.

BPCL, Reliance Industries (RIL), Shree Cement, UltraTech Cement and UPL are among the 21 Nifty50 stocks that have slipped below their respective 200-DMA. HDFC, HDFC Bank, Jindal Steel & Power, Apollo Hospitals Enterprise, AU Small Finance Bank, Bank of Maharashtra, Suzlon Energy, Tata Communications, BASF India and PNB Housing Finance are some of the other Nifty500 stocks that are trading below their respective 200-DMA, charts show.

V K Vijayakumar, chief investment strategist at Geojit Financial Services, too, believes that the global macro construct is not favourable for equity markets in the short-run. The dollar index above 113 and the US 10-year yield at 3.73 per cent is likely to aggravate FPI outflows, which have been gathering momentum during the last three days. That said, he believes the selling has been aggressive and Indian economy and markets are likely to outperform their global peers going ahead.

“The probability of a global recession is also increasing since the Fed continues to be ultra-hawkish. The 5 per cent cut in MSCI World Index last week indicates the bearish undertone of global equity markets. However, India will outperform both in economic growth and market performance. Selective buying can be done in domestic economy-facing segments like financials, autos, capital goods and select FMCG on sharp market declines," he said.

The recent correction, technical analysts said, has dampened the overall sentiment as the significant support levels were breached and weakness in the global markets amid upcoming key domestic data have put a sense of nervousness among market participants.

“As we have witnessed a decisive breach below the major support zone in Nifty, one should not rule out the possibility of it testing the immediate swing low. The sacrosanct support lies at the psychological mark of 17,000. On the flip side, a series of resistances can be seen starting from 17,500 to 17,800 levels,” said Sameet Chavan, chief analyst – technical and derivatives at Angel One.

Here’s the list of stocks slipping under 200-DMA on Monday:-

Source: spidersoftwareindia