Indian Stock Market Slumps: What Should Investors Do?

The benchmark indices fell by 0.8% in today’s trading session. However, the overall sentiment remains positive, buoyed by continued buying by overseas investors.

FPIs sold domestic shares worth ₹526 crore yesterday. Amid weakness in the Indian equity markets, investors are locking in profits due to lack of fresh triggers. This comes after the Nifty and Sensex declined by 4% last week.

Last week, Nifty and Sensex reported strong gains crossing their October peaks.

Additionally, Moody's downgrading of the U.S. sovereign rating from Aaa to Aa1 dampened investor sentiments.

Investors are also keeping a close watch on the outcomes of the India-US trade deal.

What do analysts say?

Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “In the near term, the market is likely to enter a consolidation phase. High valuations will cap the upside, with institutional selling emerging on rallies. This was evident from institutional activity yesterday, when both FIIs and DIIs turned sellers—though marginally. Market dips are likely to be bought into, as mutual funds are sitting on a large cash pile.”

“Globally, the credit rating downgrade of the U.S. has introduced an element of disquiet in financial markets. Even though this is not an immediate threat, it could have a sentimental impact by increasing uncertainty and the potential for fallout from currently unforeseen developments. Investors can adopt a cautious approach by selling on rallies and buying on dips in the near term,” he added.

Domestic brokerage firm Way2Wealth said, “Nifty appears bullish on most technical parameters. It is trading above key short-term and long-term moving averages, consistently making higher highs. After a strong rally, Nifty is likely undergoing some consolidation. Currently, immediate support is placed in the 24,950–24,900 zone, while strong support lies at 24,650.”

The brokerage added that resistance is located at the 25,100–25,300 levels. “Buying on dips should be the preferred trading strategy, as the overall trend remains bullish. One can consider buying Nifty near or above the 24,900–24,950 zone for a target of 25,100 and 25,200. Any close below 24,650 should warrant a review of the current outlook,” it stated.