Capitalise on this crash: Sectors to eye right now

Monday, January 21, 2008

Capitalise on this crash: Sectors to eye right now

India is the worst performing market today and Japan's Nikkei declined 3.865% or 535.35 points, Hong Kong's Hang Seng tumbled 4.425% or 1115.12 points Singapore's Straits Times slipped 3.23 and South Korea's Seoul Composite fell 2.95%.

It is proving to be an extremely scary session for the markets as fall has continued further. There is panic selling in markets and nearing to hit a down circuit which comes in at 10% down. Now the Sensex and Nifty are down nearly 7%. Margin call is seen building up.

It has broken all technical and psychological levels. Both Sensex and Nifty has fallen 16% from their highs. Breadth has worsened and the advance decline ratio is over 1:50. According to analyst the scenario is similar to the May 2006 fall. There is pressure due to triggering of margin call. Nifty Futures is trading at 100 points discount.

Shashank Khade, VP - Portfolio Management Services, Kotak Securities feels that the value that is right now emerging is clearly in technology, in auto and in FMCG. Valuations are really cheap right now in these three sectors, he feels.

He said, "My sense is that the markets may tend to go ahead and rotate the sectors itself. The underperformance that you had seen in the last six to eight months may actually start looking good, because not only did they not participate on the way up, they have also participated on the way down, which clearly means that the valuations of these stocks have got much more interesting. Sectors, in this sort of space would include FMCG, auto, technology, which may actually become extremely cheap in terms of valuations. So, while the infrastructure stocks may continue their consolidation and correction, it could be that monies may actually get rotated into the other stocks, which haven’t participated at all."

He adds that, "The value that is right now emerging is clearly in technology, in auto and in FMCG. It is a call as to how much of the negatives in these sectors per se have been factored into these prices. That is the biggest call here. In FMCG and auto, the growth has not been as strong and that is the reason why these stocks have been really down and under. But valuations are really cheap right now in these three sectors."

Vibhav Kapoor of IL&FS said, “We like banking a lot. There is definitely value in banking, capital goods; infrastructure has been beaten down. But there is good value in some of those sectors. In fact we are basically avoiding cement, technology sector and global commodities, which are metals. Apart from these three sectors, we think there is a lot of value in many other sectors.


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