408 of BSE 500 stocks below 200-day moving average amid sell-off in markets

More than four-fifths or 408 of BSE-500 stocks have slipped below their 200-day moving average (DMA) following the sell-off in equity markets.

The 200-DMA — nearly a year’s average of closing prices — is analysed by traders to understand the market sentiment. A fall below these levels indicates a weak trend.

Among individual stocks, Solar Active Pharma Sciences is trading more than 60 per cent below its 200 daily moving average (DMA). Indiabulls Real Estate is trading 50 per cent below its 200 DMA. Stocks like Dilip Buildcon, RBL Bank, Welspun India and Metropolis are trading more than 40 per cent below their 200-day average. As many as 292 top-500 stocks are trading more than ten per cent below their 200 DMAs.

The rise in volatility in the markets has led to a correction in equities across the board due to a number of factors, including fears of aggressive rate hikes by central banks, including the US Federal Reserve, high commodity prices due to supply disruptions caused by the Russia-Ukraine war and lockdowns in China.

Analysts said there is little chance of the 200-day DMA of top 500 stocks improving soon as volatility-inducing factors show no signs of dissipating.

"One would not be surprised even if the entire universe trades below the 200 DMA this month. The markets need to fully discount the rate hikes for any meaningful change to happen,” said G. Chokkalingam, Founder, Equinomics

Monday meltdown: What experts think

"Many people are talking about a 75-basis point hike, even a 100-basis point hike. The markets are worried about how aggressive the Fed will be. A global recession is going to hurt export trades. But our growth is not reliant on global growth to that extent. The good news is that the commodity prices will start falling, though one is not sure about oil. And inflation will come down quickly. And the Fed will have to stop hiking rates if the US goes into recession. And the whole risk-on trade will start to happen sooner than expected."
Andrew Holland, CEO, Avendus Capital Alternate Strategies

"Indian equities are unlikely to come out of the bearish phase until the inflationary outlook improves in America or corporate results in India are decisively better. If neither happens, we will continue to be in this pattern of being dragged down by the situation in the US. The irony is that the Indian economy has been the strongest in years on corporate results and high-frequency economic data. But the outlook for US markets is the grimmest "

Saurabh Mukherjea, founder, Marcellus Investments

"It seems the markets had factored a 75-basis point hike already. The decline has to stem unless there is some negative surprise from more hawkish comments by the Fed. Unless the US markets drop sharply today, the Indian markets have something to cheer for tomorrow

U R Bhat, co-founder, Alphaniti Fintech

"Valuations are now more moderate as compared to the Oct-Dec 2021 phase. They are closer to their longer-term average. Valuations have declined across the globe. On a relative basis, India continues to trade at a premium to the MSCI emerging markets, though the premium has dropped. In India, negative FII flows are an added negative factor, though domestic retail inflows have countered these outflows. Finally, corporate earnings forecasts remain robust, despite economists shaving off economic growth rates. How this will play out needs to be seen"

Anoop Bhaskar,  head-equity, IDFC AMC

"The equity market is likely to be volatile until the Fed is done with tightening... Apart from this, future market triggers, which may cause volatility include rising crude oil prices, stickier inflation profile on account of supply-side disruption, and uncertainty around the ongoing Russia-Ukraine conflict. So, the road ahead calls for adhering to asset allocation by investing in asset allocation or multi-asset schemes, which take exposure to various asset classes."

S Naren, ED & CIO, ICICI Prudential AMC

"From a cyclical viewpoint, we are witnessing a combination of rate hikes and liquidity tightening, and thus, it is prudent to have modest expectations from the market. We believe that recovery in the markets would depend upon the duration of the Russia-Ukraine crisis and the pace of monetary tightening, along with a reduction in liquidity, both globally and in India. Our recommendation remains that investors should continue their SIPs and use any corrections to add to their equity exposure."

Mahesh Patil, chief investment officer, Aditya Birla Sun Life AMC