Market crash;11 of 17 Nifty sector indices in correction mode auto, PSU hit

An index or a stock is said to be in a 'correction' phase when it has dipped over 10 per cent and up to 20 per cent from its recent peak level. A 20 per cent or more fall is termed as a 'bear' phase

11 out of 17 frontline Nifty sector indices are in ‘correction’ mode with energy, auto and central public sector enterprises (CPSE), consumption, fast moving consumer goods (FMCG) indexes suffering the most in the recent market fall, suggests data.

 

An index or a stock is said to be in a ‘correction’ phase when it has dipped over 10 per cent and up to 20 per cent from its recent peak level. A fall of 20 per cent or more is termed as a ‘bear’ phase for the index or a stock. 

 

 

The Nifty Media (down over 47 per cent) is the only sectoral index that has slipped into a ‘bear’ phase with a fall of over 20 per cent from its all-time high hit back in January 2018. The Nifty Realty index is also veering close to the bear territory with a fall of nearly 17 per cent from its peak levels hit in May 2008. 

 

Nifty Pharma, Services Sector, Financial Services, Bank and IT indices, on the other hand, have lost between 2 per cent and 7 per cent from their respective all-time highs hit recently, data shows.

 

Meanwhile, frontline indexes, the Nifty 50, Nifty 500, Nifty Midcap 100 and Nifty Smallcap 100 are on the edge of slipping into a correction mode, and have lost over 8 per cent from their peak levels in September 2024.

 

Stock Market correction

 

Consumer-facing sectors, according to Vikas Khemani, founder, Carnelian Asset Management, are experiencing cyclical challenges. FMCG, consumer durables, and auto original equipment manufacturers (OEM) sectors, he said, witnessed slowdown during the recently concluded quarter, while banking stocks with exposure to unsecured credit are also beginning to show signs of stress. 

 

“Our view is while the broader markets might give single digit to mid-teens kind of returns in the next one year, selective, stock-specific opportunities will always be there. We expect sectors such as Financials, information technology (IT), Pharma and Capital Goods to do well. Chemicals should start doing well towards the later part of the year. Defence, railways and select capital goods have seen a very sharp run-up, and we find risk-reward in these unfavorable for fresh allocations,” Khemani said. 

 

The sharp fall in Indian markets is mostly attributed to a sell-off to the tune of Rs 1.14 trillion by foreign institutional investors (FIIs) – the biggest withdrawal by them since the Covid-led market crash in March 2020 when they sold around Rs 65,000 crore worth of Indian equities. In May 2024, they had pulled out around Rs 42,200 crore ahead of the general election outcome.

 

Foreign investors, according to G Chokkalingam, founder and head of research at Equinomics Research, may continue to sell for a few more weeks or even a couple of months. But, their selling would be largely focused on large-cap stocks, and especially those who post a weak set of results for the September 2024 quarter amid tepid guidance for the quarters ahead.

 

In this backdrop, he suggests investors start cherry-picking stocks from the mid-and small-cap (SMC) segments where there is earnings visibility and the latest quarterly numbers were robust. 

 

“The time is ripe to increase the exposure to quality SMC stocks. Many sectors within the large-cap segment like IT, cement, FMCG, steel, passenger vehicles, etc. are seeing single-digit growth in terms of volume sales or revenues. However, the SMC segment has many unique and diversified sectors / products / services that offer continued growth prospects or hold deep value after the recent correction,” he said.