Market capitulation not complete, keep equity portfolio light: Analysts

NEW DELHI: The domestic market has shed about 6 per cent of value so far this year as a broad-based selloff in January saw investors flock to the exit door. And, for some experts the capitulation is still not complete.

“In our view, the capitulation has still not happened. It will happen down the line. The first signals are very clear. Retail participation is now slowing down and the first time when we will see a reversal of retail participation could be the start of the capitulation process,” said Ajay Srivastava, CEO, Dimensions Consulting.

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How bad can it get?

Srivastava says many of the stocks are still overvalued and, therefore, the market is far away from forming a concrete bottom.

“I still believe a lot of the stocks are still overvalued in this market. In fact, I would say better performing stocks are all overvalued to buy in a market like this, as the economy is still struggling at 5-5.5 per cent growth rate,” he said.

“I think we will test new lows, and I do not know where it will stabilise. I think we have not yet seen the lows, as far this calendar year is concerned,” he said

Pashupati Advani of pashupatiadvani@globalforay echoed similar sentiments.

“I do not think it is over, and I do not see any trigger that can prop up the market. It is not just India, we are the best of what is left, but the thing is that there are problems happening all over the world,” he said.

What should investors do?

According to Ajay Srivastava, holding on to your capital is your best bet for now. “In a volatile environment like this, where there are lots of cues coming from global central banks, global markets, oil market and commodities; you have got to simplify your life and sometimes capital preservation is also a good idea,” he said.

Pashupati Advani wants you to go light on your portfolio. In an interview with ET Now, he said 50 per cent of his portfolio is currently cash as he still doesn’t rule out a further downside for the market in the near term.

Investors should look for the formation of a broad trend before getting their feet wet in the market, Srivastava said.

“For a broader participation in the market, you need to make things settle down, have a trend going. It is too volatile to call [the market], I believe establishing a trend is a good idea and then you start to invest. You may lose out the first 10% of your return but that is alright,” he advises.