Nifty down 11% from highs, but fall not over yet: CLSA

Benchmark indices have corrected 9 per cent from their all-time high levels, but CLSA said that top indicators are yet to signal a final low.“Possibly, a large part of price fall may have played out but we may see a longer correction period,” said CLSA.Indian markets have been hit by the global sell-off as the Covid-19 spreads beyond China. Even India, which had been relatively less impacted till last week has seen new confirmed cases of the virus. Earlier this week, the Nifty touched a low of 11,036.25 intraday, which would mean an 11 per cent correction from its lifetime high levels.According to CLSA, the ongoing decline is the 19th instance of an over-10 per cent fall in the Nifty since 1992.Earnings yield of the Nifty minus the 10-year bond yield is near levels which have coincided with historical Nifty bottoms. The Nifty earnings yield is only 0.2 percentage point above the bond yeild which indicates that attractiveness of equities is rising compared to debt. 74503516 However, market’s volume, volatility, momentum and breadth indicators have yet to confirm a low.“With valuations (PE and vs the 10-year bond) supportive but momentum indicators yet to signal a bottom, we expect a correction period before a final bottom is made," said CLSA.Daily volumes, volatility and selling intensity in the market tend to peak before a bottom is hit and these indicators are off their peaks when an actual bottom is hit in the market, the brokerage said.In contrast, technical indicators suggest that there may be support for the index at 10,600-10,900 levels.“Over the past decade, secondary corrections to the tune of 15 per cent within the framework of a structural bull market is considered a normal bull market correction, offering a favourable risk reward... In the current scenario, the index has already corrected 11 per cent, thereby offering a favourable risk reward,” said ICICI Securities.The domestic brokerage firm believes HDFC Bank, United Spirits, Larsen & Toubro, TCS, Tata Steel, Biocon and Bharti Airtel are bargain buys.

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