The S&P BSE Sensex and the NSE Nifty posted a second monthly fall on selling by foreign institutional investors on tax woes, forecast of weak monsoon and disappointing Q4 earnings so far.

Remain active: analysts While the Sensex is tantalisingly close to 27,000, the Nifty closed below the 8,200 mark.

Investors’ wealth in BSE-listed firms, measured by market capitalisation, slipped below the ₹1 lakh crore mark, to stand at ₹Rs 99,70,671 crore. However, market experts advice investors to remain active in the markets.

Peter Kohli, CEO, DMS Funds, which specialises in emerging markets, believes India is a still a ‘buy’. In a write-up on the Nasdaq website, he said: Unfortunately, this is India and old habits die hard... I still, and I’m not looking through rose-coloured glasses, believe India is a buy.”

Surprises on rates front UBS, which revised Nifty year-end target downwards to 9,200, said post-correction the risk-reward for the market has improved.

Indian markets have corrected recently, reflecting reset of growth trajectory expectations. “While earnings estimates for FY16 have been cut 7 per cent over the last six months, we still expect further cuts top-down,” UBS said and added: “Positive surprise on rates cycle will be the supporting factor for markets ahead.”

Kishor Ostwal of CNI Research, said, it is ‘buy on declines’. According to him, Minimum Alternate Tax or MAT is not an issue to halt the market’s progress. Ostwal said: “Investors, particularly retail, should concentrate on quality small- and mid-cap stocks and avoid over-leveraged ones.”

Declining vulnerability The market turned volatile as there is no physical settlement in the F&O segment. To identify quality stocks, retail investors should rely on solid research, he added.

UBS said its discussions with investors suggest recent trimming of overweight positioning, especially as India’s relative attractiveness was diluted by some other markets doing well.

With the US Fed moving towards normalisation of its monetary policy, Fitch said, India’s vulnerability is declining towards capital flight.

“A changing policy environment has had a positive impact on India’s macroeconomic risk profile. The government’s broad-based reform agenda, introduced following the 2014 general election, could transform the country’s business environment and investment climate. India’s real GDP growth is now forecast to accelerate to 8 per cent in FY16 ending in March, from 7.4 per cent in FY15, although achieving higher real GDP growth depends on implementation.”

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