Impositions of long-term capital gains tax (LTCG) in the Budget, fears of extended rate hikes by the US Federal Reserve, as well as unfolding of Nirav Modi- PNB saga led to massive 1780 points or 4.9 percent fall in the S&P BSE Sensex in the month of February.
The correction was equally fierce in the Nifty50 index which corrected from the high of 11,000 levels to 10,492 levels on 28th February. The index lost 5 percent and is now trading below its crucial short-term moving averages.
But, there was plenty of action in the small and midcap stocks which rose up to 45-47 percent in the same period but the correction was equally fierce in this space as some stocks lost up 60 percent in the same period.
In the S&P BSE 500 index over 100 stocks outperformed the S&P BSE Sensex. Stocks which outperformed the index or rose in double digits include names like Venkys India which rose 45 percent, followed by Firstsource Solutions which gained 25 percent, and IDBI Bank rallied 24 percent in just one month.
The index is in the middle of correction and investors should not get overall worried about the recent decline was seen in the month of February which was just 5 percent after a 29 percent rally seen in the calendar year 2017, suggest experts.
It is a good opportunity for long-term players to accumulate quality stocks on dips as the index should be able to pick the pace and reclaim record highs of 11000 later in the year.
"This the fifth year of a bull market which has been a slow steady one with very little volatility. There have been a few corrections and we are in the middle of one at present. For the long-term investor, this is still a buy on dips market," Dipan Mehta, Director, Elixir Equities Pvt. Ltd told Moneycontrol.
"Investors should nibble into the bluest of blue-chip stocks. Companies which have missed in the bull market so far must be targeted for investment. Investors must endeavor to improve the quality of the portfolio," he said.
In the Smallcap index, as many as 171 stocks managed to outperform the index which includes names like Nelco which rose 47 percent, followed by MSR India which rallied 42 percent, and Infinite Computer Solutions gained 29 percent in the month of February.
In the midcap space, IDBI Bank, Endurance Technologies, Cholamandalam Investment & Finance Company Ltd, L&T Infotech, Ashok Leyland, 3M India, and Bharat Forge.
“Midcap and smallcap indices have been hit the hardest post-budget correcting in excess of 5 percent each. However, following this sharp correction they have cooled off from overbought territory suggesting that incremental corrections from these levels can be used for buying,” Aditya Agarwala, Technical Analyst at YES Securities (I) Ltd told Moneycontrol.
“The strategy continues to be a 'sell on rallies' in the benchmark indices but a 'buy on dips' in midcap & smallcap Indices which could be a prudent strategy,” he said.
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