3 out of 5 Nifty 500 stocks below 200-DMA; buy for the long term: Analysts

A total of 333 stocks from the Nifty 500 index were seen trading below their respective 200-day moving averages in Monday's trade amid the US-Israel-Iran war triggered market fall.

Market sentiment took a hard knock on Monday amid the West Asia conflict with nearly 67 per cent (or 3 out of 5) Nifty 500 stocks falling below the 200-day moving average (200-DMA).  In terms of absolute numbers, a total of 333 stocks from the Nifty 500 index were seen trading below their respective 200-DMA in trade on Monday. The fall in these stocks, analysts said, presents a good opportunity to buy, but investors will have to be patient with their investment to reap meaningful returns.  “There has been a sharp correction in these Nifty 500 small-and mid-cap stocks (SMIDs) from their peak levels, and the valuation for most counters is not too steep. That apart, the volatility in the secondary markets is to keep primary market activity in check. Investors, therefore, will focus on beaten down quality names from the SMID segment. One can buy selectively from a long-term perspective. Within the lot, I suggest looking at stocks of domestic economy-focused companies,” said G Chokkalingam, founder and head of research at Equinomics Research.  In technical terms, the 200-DMA is considered as key parameter in determining the bullish and bearish bias. In general, stocks or indices holding above the 200-DMA are considered as trading with a positive bias (bullish) and vice-versa.  The breach of the 200-DMA is a significant development. Historically, the 200-day moving average serves as the "line in the sand" between a bull and bear for markets, said Kunal Shah, senior technical analyst at Mirae Asset ShareKhan. 

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  ALSO READ | Can Nifty crash to 24,000 amid West Asia crisis? Here's what chart suggests  At noon on Monday, the Nifty 50 index quoted with a loss of nearly 1.5 per cent around 24,800 levels. The Nifty 500 was also down 1.5 per cent at 22,800 levels, and below its 200-DSMA for the second straight day. At current levels, Nifty 500 was down when compared to the 200-DMA, which stood at 23,310 levels.  Angel One, Apollo Tyres, Bata India, CDSL, Dixon Technologies, DLF, Avenue Supermarts (DMart), Escorts, Gail India, Hindustan Aeronautics, HPCL, Indian Hotel, IRCTC, Jio Financial Services, Jubilant Foodworks, LIC India, MRF, Paytm, Pfizer, PolicyBazaar, RailTel, RCF, RVNL, SBI Card, Solar Industries, Swiggy, Tata Chemicals, UPL, Varun Beverages, Waaree Energies, YES Bank and Zee Entertainment were among the prominent stocks trading below their respective 200-DMAs on Monday, data shows.  Pankaj Pandey, head retail research at ICICIdirect advocates a “buy on dip” strategy as regards SMIDs. “Some allocation to midcap/smallcaps is warranted given sharp fall in many of the smallcap stocks and almost zero return on the index level in almost two-year period,” he said.  From an overall market trend perspective, the duration of the war in West Asia and its impact on crude oil prices, analysts said, remains a key monitorable.  ALSO READ | Crude oil's epic fury: 300% jump! It's happened before; tracing the history  Any sustained rise in oil prices (due to supply disruptions) will be negative for Asian equities, analysts at Nomura said, which are mostly net-energy importer countries. Most vulnerable equities in the region, according to them, are likely to be India, Indonesia and the Philippines – all twin deficit countries.  “If the conflict ends relatively quickly, alongside the fall of the Iranian regime (which the Trump administration appears to be targeting), any negative impact on stocks would likely be short-lived. If this also results in structurally lower oil prices over time (due to improved perceptions of West Asia 'stability'), we think that would be an additional positive for equities,” wrote analysts at Nomura in a recent note.  Disclaimer: The views expressed by the brokerage/ analyst in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.