The Sensex and the Nifty have retreated 6-7 per cent from record highs in the last few weeks, thanks to the Union Budget proposals.
The broader markets have turned attractive, thanks to a sharp erosion in the indices, as well as the broader markets themselves. Poor high frequency data, particularly from the auto space has compounded the problem even further.
Fall in frontline stocks
For the first time in many months we are seeing frontline stocks cracking. Reliance Industries, HDFC Bank and HDFC have seen a decent fall from their 52-week highs, which has pulled down the indices. On Friday an interesting trend was noticed, wherein individuals started to slowly buy into beaten down names like Hero Motor Corp, Bajaj Auto and select few pharmaceutical companies.
It want be long before investors start looking at value in some of these names for long term investment.
What to buy for long term investment?
This is always a tricky one to answer. However, investors can stick to some high quality names from the finance and banking space, which have come crashing down. For example, names like L&T Finance Holdings and Karnataka Bank, which are at near 52-week lows, maybe good bets at the current levels.
Apart from this, one can also look at select names from the pharma space. Among these include names like Aurobindo Pharma. Some of these stocks have been so badly beaten down, value buying may emerge in these names at some stage.
Markets next week
This week, saw results from some of the majors like Vedanta, which delivered numbers that were in line with expectations. L&T too reported good numbers that were slightly below expectations.
Also, the July series for the F&O saw the worst closing in nearly nine months. In fact, the Nifty saw the third straight week of decline. The S&P BSE Sensex ended about one per cent down this week to close at 37,882.79 and the NSE Nifty 50 ended at 11,284.30, down 1.1 percent. The broader market represented by the NSE Nifty 500 Index ended 1.2 percent lower.
Markets may continue to trade flat to lower, depending on what Foreign Portfolio Investors do. They have already sold close to Rs 15,000 crores in the market this month, thanks to the imposition of tax on the super rich, which also impacts select Foreign Portfolio Investors. Some of the banking and NBFC stocks have so far been the worst impacted and going ahead, there maybe limited downside risk in some of these.
In fact, we might see some brisk recovery in stocks, on the first signs of recovery in the economy. So, buying and holding for the long-term maybe a good strategy.