Is the selling in Indian equities overdone?

Global equities, including Indian, tumbled last week as central bankers embarked on the journey on interest rate hikes. As anticipated, the US Federal Reserve chief Jerome Powell announced a 50-basis points rate hike in May policy meet, while the Bank of England raised rates by 25 basis points. However, what surprised the domestic equities was the out-of-policy 40-bps repo rate hike by the Reserve Bank of India. It also increased the CRR limit by 50 basis points. Equities are now battling fears of record-high inflation, dented prospects of corporate profitability, and likelihood of contraction in economic growth. Besides, the ongoing Ukraine war, Covid-19 related fresh restrictions in China, and select disappointing corporate earnings took their toll on the markets. Eventually, the S&P BSE Sensex ended the week with a heavy loss of 2,226 points or 3.9 per cent. The NSE Nifty50, too, plunged 692 per cent, its biggest weekly fall since late November 2021. However, as we sit near two-month lows, investors are wondering if the market has overreacted or is there more pain ahead? Speaking to Business Standard, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services says, market weakness reflects investors’ nervousness and he is skeptical of central banks’ ability to tame inflation.

Investors expect aggressive monetary tightening policy, he says. As pointed out, the near-term outlook remains volatile as investors remain skeptical of central banks’ ability to tame inflation. As regards this week, shares of Asian Paints, Cipla, GNFC, Tata Motors, Larsen & Toubro, Siemens and Vodafone Idea among others are likely to be in focus as the companies are scheduled to announce their March quarter results. Meanwhile, the primary market will be buzzing with activity. The mega Rs 21,000 crore LIC IPO received an overwhelming response from retail investors. The IPO was fully subscribed on the Day 2 of the offer period itself, despite the broader market weakness. The issue closes for subscription on Monday. The listing is likely to be on May 17. Further, Prudent Corporate Advisory Services and Delhivery IPOs will open for subscription this week.

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