Sensex dips after US rate hike, global slowdown fears

Volatility remained the flavour of the season on the stock markets, with key on BSE and NSE falling by over 2.1% on Friday, the lowest in nearly 14 months.

Volatility remained the flavour of the season on the stock markets, with key on BSE and NSE falling by over 2.1% on Friday, the lowest in nearly 14 months.

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Fears of a US interest rate hike and of an impending global slowdown sparked by the fall in the Chinese economy set the mood for the fourth consecutive weekly decline for the indices.

Global investors are also nervous due to the Shemitah, which is the last year of a seven-year cycle in the Jewish calendar, known for causing immense financial crisis.

The Sensex fell by 563 points and the Nifty by 168 points, and marketmen expect a further slide of about 4-5% (about 1,000 points), due to the volatility in Asian markets and lack of strong positives in the Indian market.

On the other hand, with most stocks coming down to reasonable valuations, they said retail investors could make small purchases at current levels that could also even out any previous losses. Between the various dips and the large crashes seen since August 24, the markets have erased most of the gains made so far in 2015.

"Timing volatility in markets is akin to catching a falling knife; generally it is best to ride out bouts of volatility," advised Dominic Rossi, global chief investment officer at Fidelity Worldwide Investment. "In the medium term, however, investors would be wise to focus on lowly-leveraged stocks with strong cash flows in the innovative sectors that will maintain market leadership."

Sanjeev Zarbade, vice-president at Kotak Securities, said, "Given the weak investor sentiment, a (US) rate hike may not go down well with most emerging markets. Valuations are coming back to reasonable levels and long-term investors should go for buying stocks of quality companies."

Some quality Sensex stocks such as L&T, Tata Steel and Bhel are 2% to 4.8% down, as are some high quality bankstocks. "The situation warrants a far sight and overcoming fear. We think this is a time to move aggressively in the equity markets," said Motilal Oswal, chairman, Motilal Oswal Financial Services.