February was not kind to India’s stock markets, with the benchmark indices Sensex and Nifty experiencing their worst monthly performance since the days of the pandemic. The Nifty index plunged nearly 2% on the last trading day of the month, reflecting broader losses seen globally. Traders and analysts are now grappling with these developments as they seek to navigate the turbulent market environment.
Analysts observe troubling signs for the Nifty, currently trading below its 21-day and 55-day exponential moving averages (EMAS). Puneet Singhania, Director at Master Trust Group, notes, "Nifty is near the 100-week EMA at 22,041, aligning with the key psychological level of 22,000. A breakdown below this could push the index toward 21,700."
Singhania also points out the daily Relative Strength Index (RSI) stands at 22, indicating oversold conditions and hinting at the potential for a technical rebound.
Investors are on the lookout for stocks with potential upside amid the downturn. Recommendations have emerged for four stocks to watch closely, with potential returns reaching up to 32%. Coal India, currently trading between Rs 360-355, has been suggested as a buy, with a target of Rs 400 and a stop loss at Rs 340 due to recent buying traction observed.
Rajesh Bhosale, Equity Technical Analyst at Angel One, mentions, "Coal India has been on a downtrend, eroding nearly 30 percent from its peak of Rs 517. It is currently showing signs of recovery, particularly above its 20-day exponential moving average."
Following suit, HDFC Bank also garners attention with its recent recovery from the 200-day simple moving average (DSMA). Trading at Rs 1,730-1,720, the stock is seen as bullish with a target price of Rs 1,850. Notably, Bhosale emphasizes, "The recent buying momentum has been supported by increased trading volumes, indicating positive developments for the bank."
While some stocks have shown bullish potential, others are witnessing significant bearish trends. Dabur India, for example, has recently broken down from a rectangle pattern, signaling possible price declines with increased selling pressure. Similarly, Infosys also observed deterioration with strong bearish setups supported by noted increases in trading volume.
Meanwhile, another major player, One97 Communications, the parent company of Paytm, has seen its shares drop by 4.3% on the BSE after it received a show-cause notice from the Enforcement Directorate (ED) concerning alleged violations of the Foreign Exchange Management Act (FEMA). The company is accused of involvement with aggregate transactions exceeding Rs 611 crore associated with the acquisition of subsidiaries like Little Internet Private Limited and Nearbuy India Private Limited.
Market analysts proceed with caution, as the company's shares fell to Rs 685 amid these proceedings. "The allegations pertain to compliance issues dating back to periods when these entities were not subsidiaries of Paytm," the company stated as it prepares to seek legal remedy.
On the smallcap front, the last trading day of February saw increasing panic as approximately 302 stocks within the BSE Smallcap index struck fresh 52-week lows, contributing to the market's broader 2% dip. This brings year-to-date losses for the BSE Smallcap index to 25%. Major contributors to this decline include companies like Texmaco Rail & Engineering Ltd and Finolex Cables Ltd.
Analysts attribute this challenging atmosphere to higher relative valuations of smallcap stocks compared to their largecap counterparts. Ajit Mishra, SVP at Religare Broking, warns, "Investors need to exercise caution, particularly avoiding the temptation of averaging down loss-making positions."
Despite the current market turmoil, some analysts suggest vigilance is necessary. Sameet Chavan of Angel One states, "With numerous stocks floundering, risk management is imperative. The technical support levels have been challenged, leading to perceptions of fragility across strategies."
Looking at the broader performance metrics, it is notable how equity investors have faced pressures across various sectors, indicating wide-ranging concern among analysts about future trajectories. The recent global economic dynamics have added to anxiety levels, resulting in substantial sell-offs, as noted by various commentators across financial media.
Sector-wise, the decline has been pervasive, reflecting upon the true impact of global economic stressors as well as domestic policy shifts. While the immediate future appears bleak for many investors, the identification of potential recovery opportunities remains of utmost importance.
The Indian stock market is at a pivotal juncture, with analysts advising prudence as volatility looks set to continue. The question many investors face now is whether to ride through this storm hoping for clearer skies or to heed the warnings and adjust their portfolios accordingly to preserve capital.