Stock Market Rebounds: Is it Time to Stay Put or Exit the Market

Stock Market Updates: After a rough stretch of three consecutive days of decline, Indian markets made a much-needed comeback on Wednesday. The rebound was sparked by a positive shift in global markets on Tuesday, which helped lift domestic sentiment.

Earlier the week, benchmark indices- Sensex and Nifty- slid by almost 3 per cent, mirroring a broader global decline. As per D-street analysts, this drop was fueled by stretched valuations, rising geopolitical tensions and fears of a slowdown in the US economy followed by NASDAQ falling into correction territory.

Investors lost more than 21 lakh crore in the last three trading sessions. Despite the bloodbath, analysts believe Indian markets are better positioned for a bounce-back. With global markets showing signs of recovery, both Sensex and Nifty gained about 1 per cent during early trading hours on Wednesday. Yet, caution remains the watchword for investors as projections for further corrections loom.

Much-needed correction or just a caution

While the market remains relatively strong compared to its global peers, many analysts have long been projecting a correction. However, after making new all-time highs earlier this year, certain pockets of the stock market slipped into the overvalued territory.

"Indian markets were indeed a bit expensive after the recent rally. A correction was long overdue and it's in fact healthy for the markets. Not all the stocks whether it is Large/Mid/Small cap were expensive, but there is some froth in certain pockets. Some stocks did run ahead of their fundamentals and a correction is only clearing that over-pricing," said Mohit Khanna, Fund Manager at Purnartha PMS.

Stay Put or Cash out?

"Wait and Watch," is the common call for analysts as markets continue to remain volatile at the higher end. The domestic volatility index, VIX, was trading at 35 per cent lower on Wednesday at 01:30 pm.

While caution remains in the air, positive economic signals could sustain market sentiment.

Jyoti Prakash Gadia, Managing Director at Resurgent India pointed out that the India growth story is comparatively better and an approach to stay put at this stage may be more fruitful.

On the corporate front, quarterly earnings did fail to impress the D-street as performance fell below industry expectations, consumer goods sector managed to uplift the market mood. During the market rout, Nifty FMCG was among the best-performing indices.

"Short-term traders should tighten the stop loss to protect their capital.

From a positional index perspective, quality or value stocks have started to outperform momentum stocks. It's important to be selective in terms of sectors," said Kapil Shah, Technical Analyst, Emkay Global Finances.

Traders can focus on Consumer Durables, Paints, FMCG, and Pharma stocks, while Metal, Realty, and Capital Goods stocks are experiencing selling pressure, Shah further added.