Banks give up gains in a battle between bears and bargain hunters

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Banks give up gains in a battle between bears and bargain hunters
BCCL
  • Markets have been volatile for the last one month, wherein it lost nearly 5% i.e., over 2,700 points on account of concerns over the next wave of COVID-19.
  • At the same time, investors have been hunting for valuable beaten down stocks to invest in.
  • In the last one month, investors have been parking money in theme stocks like pharma, diagnostics, IT services companies that would not only survive but thrive if another lockdown comes true.
Indian markets have been oscillating between gains and losses since the past couple of weeks as new information on the new COVID-19 variant — Omicron — changes the market mood. During this time, banking stocks have fallen the most in the market among other sectoral indices.

On November 30, Indian benchmark indices Sensex and Nifty 50 had gained nearly 2% in the early trade hours after US President Joe Biden toned down concerns over another wave of coronavirus as he called the new COVID-19 variant a cause for concern but ‘not a cause for panic’. Also, he hinted that the US is not considering any widespread lockdown anytime soon.

While Indian markets are trading in a positive range at 1:44 p.m., other Asian indices like Hong Kong’s Hang Seng and Japan’s Nikkei 225 were down nearly 2%. The weakness in Asian markets was because of the reported slowdown in China’s services sector in November.
Asian indices% change on November 30 as of 2:00 p.m.
Sensex 0.5%
Nifty 500.47%
Hang Seng (Hong Kong)-1.58%
Nikkei 225 (Japan)-1.63%

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“At the moment, the Indian market is highly sensitive to news flows. It seems like the domestic institutions are targeting the current defensive stocks like pharma, FMCG [fast moving consumer goods] while interest in buying banks and other NBFCs seem very low,” Srikant Chouhan, executive vice president and head of research at Kotak Securities told Business Insider.

Deven R Choksey, managing director at KR Choksey Investment Managers told Business Insider that sharp corrections in recent times have made the market more volatile. However, he says fundamentals are still in place. In such cases, investors sitting on money will buy stocks that are available at 10-20% cheaper valuations. “I believe there is little less to worry about this time [compared to the last two lockdowns] as vaccinations are already happening. So things will not turn out to be worse at least,” said Choksey.

In the last one month, many valuable stocks have fallen in line with weak cues from global markets. But like some analysts said, fundamentals still seem to be in place for many large company stocks. Following this, it is seen investors have also been buying some of these stocks at every dip.
Large cap stocks that have fallen most in last one month% returns in last 30 days
IndusInd Bank-28%
Axis Bank-13%
Punjab National Bank-12%
IDFC First Bank-12%
ICICI Bank-11%
Federal Bank-11%
SBI-11%
AU Small Finance Bank-9%

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