Largecaps could correct another 5-10%: Envision Cap

Nilesh Shah of Envision Capital said the markets have fallen significantly from their peaks. "It is difficult to call a bottom for the markets. Individual stocks have fallen 30-60% from their peaks." Shah expects largecaps to correct 5-10% and individual stocks by 10-20%.

A number of hedge funds are going bust causing sell-off in individual stocks, he said. "Since December, FIIs and mutual funds have net sold Rs 7000 crore. Insurance companies have absorbed this. Bank, corporates, and large HNIs could have caused the selling pressure. Possible hedge fund liquidation could have added to the selling pressure in the last two days," he explained.

According to Shah, sentiment and liquidity remain key. "We may see short-term intermediate rallies but the trend remains negative. The markets could see redemption pressure from mutual funds and portfolio managers going forward."

He still sees some froth possible in banking, especially in private sector banks. "We could see a compression in profitability going forward. Liquidation by hedge funds which own these stocks is adding to pressure."

There is a global de-rating of the financial services space, he added.

Source : MoneyControl