'Retail investors have to stick to their asset allocation plans and continuously do portfolio reviews.'
Independent market analyst Deepak Jasani, formerly head of research, Retail at HDFC Securities, tells Prasanna D Zore/Rediff.com that investors need not panic and at this point it is not prudent to blame the sudden fall in markets today to emergence of two cases of the Human Metapnuemo Virus in Karnataka.
Here's why he thinks the markets are falling today and what retail investors must do irrespective of market conitions
1. Disappointing Corporate Earnings and Weakening Rupee
Net-net foreigners (foreign institutional investors) still find Indian markets expensive given the fact that the (corporate earnings) growth has not resumed and the rupee continues to depreciate (against the US dollar; the rupee is trading near 86 to a US dollar in the futures market; weakening rupee is bad for an economy that is net importer of crude but benefits companies that earn dollars via their exports).
See now they (the FIIs) will continue to monitor the emerging data points (the macro economic data points like inflation, fiscal deficit, growth in manufacturing and services sector, etc) and if they see some rays of hope in the new data than they may come back to India and they will stop selling also. But we don't know when that will happen.
When will the macro and micro data start improving? We'll have to wait and watch out for these data points.
2. The Immediate Reason Could Be...
The immediate justification (for today's fall) could be the HMPV (Human Metapneumonirus; India's ICMR declared that two cases of HMPV were found in Karnataka.
The immediate reason that people (market experts) may want to attribute to today's fall would be the emergence of two cases in India.
3. GDP Concern
The main issue, however, is about earnings growth and related valuations, the rupee depreciation and the lesser possibility of concerns over GDP growth resumption in the near term.
One cannot say whether they will continue to sell in this quarter (they have been net sellers to the tune of 1.9 lakh crore in the last three months of 2024 and have been net sellers to the tune of Rs 4.500 crore in the three trading days of January 2025), in the next quarter because they ultimately want to make money.
They will buy India only if valuations (in relation to earnings) become reasonable and their expectation of economic growth improves.
These are some reasons why the FIIs may not be very gung ho about India at this point of time.
4. Fear Over Trump Starting A Tariff War
That is not a concern for us at this point of time. Actually it may be better for India. At this point of time there is no need to get panicky about it.
5. Knee-jerk reaction over HMPV virus cases?
I don't know whether that is the main reason for the fall but as of now we are just attributing this reason to the fall, whether this is the right reason or the only reason, I don't know.
Nobody can find any other reason at this point of time. We know only when the FII numbers are out in the evening.
6. Advice for retail investors
- They have to stick to their asset allocation plans and continuously do portfolio reviews.
- Stick to the asset allocation plans. Don't go overboard on any asset class including equity.
- Keep taking profits on stocks that have run up very sharply and even take losses on some of the stock.
- Keep an eye on stock price action and how it is behaving with respect to that company's fundamental and business growth.
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