Normalisation process on

The market started the F&O expiry week on a subdued note as key indices ended with losses over soured sentiments over loan fraud cases in the PSU bank space.

The Sensex lost 236.10 points, or 0.69 per cent, to settle at 33,774.66, while the Nifty-50 lost 73.90 points, or 0.71 per cent, to settle at 10,378.40. 

The market witnessed huge volatility, with key indices opening higher but erasing gains to sink into the negative zone.

The BSE Mid-Cap Index declined 1.05 per cent and the Small-Cap fell 0.99 per cent. Both the indices underperformed the Sensex.

The sectoral indices that fell more than 1 per cent were BSE Healthcare (-1.1), Auto (-1.11), Capital Goods (-1.56 Metal (-1.6), Oil & Gas (-1.01) and Realty (-1.12). The Bankex was down 0.57 per cent.

 

Analyst views

Shailendra Kumar, CIO Narnolia Securities, said: The global financial markets are undergoing a ‘normalisation process’ with the start of CY2018. The Dow Jones, in the last 400 consecutive trading sessions, has not posted an intermediate correction of more than 5 per cent from the peak to trough, and this is a record since the year 1950. Commensurately, the Nifty did not ever correct by more than 5 per cent during 2017, which is a record.

“In 2017, the average of the daily US VIX Index, a measure of fear in the market, has been 11.1, which is the lowest since 1986 when the index was started. In 2018, we are once again in a ‘normal market’ where the market will witness a couple of extreme months and many small up and down months almost like a normal Gaussian curve.

“Nifty EPS for FY18 now is 481, For FY19 it is 558 and forFY20 it is 642. At the end of 2019, the market will be trading at FY20 earning. So if one takes PE of 21–Nifty target for Dec 2019 comes to be 13,482. i.e. a return of 28 per cent, So about 14 per cent compounded. Even a PE of 20 would give you 11 per cent-plus. And if the Nifty falls more, the yield would become even more attractive. So, buying on dips would only add to your investing return.

Jayant Manglik, president, Religare Broking, said: Markets are seeing excessive volatility at present, citing local issues and the upcoming derivatives expiry will further fuel the same. We advise keeping a stock-specific trading approach and maintaining strict risk management rules to avoid unmanageable losses.

—Ashwin Punnen