The equity markets experienced a downturn on Tuesday, witnessing selling pressure as indices plunged.
The BSE Sensex recorded a significant decline of 559 points, settling at 71,712, mainly driven by selling pressure on heavyweight stocks. Leading the losses, Ultratech Cement observed a more than 3 percent drop, while M&M, L&T, and Wipro faced declines of over 2 percent each.
V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted a crucial trend: the volatility index VIX surging to 14.5, signaling imminent high volatility. He cautioned against the recent sell-off in the final 30 minutes on Monday, indicating potential significant selling at elevated levels.
The Nifty's impressive 1000-point surge in the past month injected notable momentum into the market. However, Vijayakumar cautioned that retail investors, driven by the remarkable 2023 returns, have become exuberant and are pursuing stocks regardless of their high valuations, especially in the mid and small-cap segments. He warned against falling prey to 'recency bias' and advised against chasing lower-grade stocks in the broader market.
Despite the domestic scenario, the decline in the dollar and US bond yields presents a favorable global backdrop for equities. Forecasts suggest substantial Foreign Institutional Investor (FII) inflows in 2024, with the potential to uplift high-quality large-caps, particularly in segments like banking, where valuations remain reasonable, he added.
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(With Agency Inputs)
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