In Jan 2019, the Nifty hit the 11,000 points mark for the very first time. In just 4-months (by May) it crossed the 12,000 points mark with some ease. The sharp gains of 1,000 points in just four months were because of just a handful of stocks including the heavyweights HDFC, Reliance, HDFC Bank, TCS and Infosys. These 5 stocks pulled the Nifty higher, while the broader markets fell to abysmal depths.
Finally, these stocks are losing sheen
The above mentioned stocks, particularly HDFC, is heavily owned by Foreign Portfolio Investors (FPIs). They are dumping this stock because of the levy of surcharge on the super rich, which now also becomes applicable to a select few FPIs. HDFC has now shed close to 8 per cent from peak levels and so is the case with HDFC Bank. It is highly likely that as long as FPIs keep selling we will see more pressure on these stocks, which will also drag the broader markets lower.
Broader markets beginning to see some buying
An interesting trend being observed in the markets for the last couple of days is that the HDFC twins and Reliance is being hammered down and stocks that have been badly battered are being bought into.
Finally, the markets are beginning to make sense as investors are taking a fresh look at beaten down names, while shunning the heavyweights.
In fact, there is still so much value in select beaten down names that it would not be a bad idea to start buying into them.
Some of these stocks are already beginning to offer a solid dividend yield. Two classic examples are Coal India and Indiabulls Housing Finance. In fact, Coal India is not very far away from its 52-week low.
Stick to good quality names
However, it would also be prudent to sit on some cash and wait for a further downside in the markets. Do not invest all money at one go. Looking at the condition of the markets, investors should start nibbling and leave some cash on the table as well. In case the slowdown persists, you may suddenly find good quality stocks turning more attractive.
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