The markets fell without much relief throughout the week. The selling was persistent, ending the week on a very difficult note. Sales of Indian equities by FIIs exceeded a billion dollars on Friday alone. The selling is now fast spreading into the more popular parts of the market like midcap and small-cap stocks.
The popular quality stocks among large-caps were also dumped last week, leading to a sharp cut in their prices. This trend is looking ominous. The entire fall is driven by weak global sentiment, falling EM exposures of global investors, and rampant selling of Indian equities by FIIs. This trend is likely to remain and probably even grow stronger in the near term.
There are hardly any triggers to engineer a rebound in equities and inflation fears are only going to push edgy investors out of the market. The pressure will progressively become too much to handle for investors, and we are going to see many bail out of their holdings to cash.
The losses made by investors in cryptocurrencies are further worsening the investor mood. Equities are the only recourse for investors to sell and recoup some of these losses. This could worsen the trend in Indian equities, and further selling will drive markets to an even more difficult place. But, we don’t see what can immediately arrest this trend and reverse it.
In the absence of any reversal signs, investors must be prepared for further weakness in markets. But, this weakness must be utilised to scale up their exposure in select equities, raise the equity in their overall asset allocation and undertake specific investments that will help the portfolio perform when markets reverse in due course.