The domestic stock markets are likely to open on firm note on Friday. SGX Nifty at 17,685 indicates a gap-up opening of about 100 points, as Nifty futures on Thursday closed at 17,588.
Analysts are bullish on Indian stocks in the medium to long term and advise investors to add quality stocks on dips.
Jitendra Gohil, Head of India Equity Research, Credit Suisse Wealth Management, told BusinessLine that India’s medium-term outlook for equities is “still attractive” and noted, in the near term, the firm prefers banks and pharma, as well as sectors that could benefit from higher consumer spending ahead of the festive season.
Ajit Mishra, VP-Research, Religare Broking Ltd, said: "The recent move in the index indicates consolidation after the phenomenal gains and we expect the trend to continue."
Global trends to impact
According to analysts, global markets will drive Indian stocks in the short-term.
In the absence of any major domestic event, the market will take cues from the performance of the global indices, Mishra said and added: "We recommend focusing on position management and preferring stocks from the defensive basket."
Equities across the Asia-Pacific region are up. Indices in Japan, Australia, Korea and Taiwan have risen by about 0.7 per cent. US stocks, too, closed strong overnight ahead of the Fed meeting outcome.
Fed meet eyed
Prashanth Tapse - Research Analyst, Senior VP (Research), Mehta Equities Ltd, said: "There was also some element of nervousness ahead of the Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole symposium this Friday. The street suspects that any further rate tightening could increase the odds of the economy entering a recession."
The other key negative catalyst for the day was WTI crude futures spiking above $95 per barrel amidst concerns about tightening global supply, said Tapse. "Technically speaking, the Nifty line on the sand is at the 17345 mark. Aggressive buyers are advised to take a backseat if Nifty slips below its biggest support at 17345," he added.
'Buy on dips for the long term'
Both domestic and global analysts advise investors to buy equities on dips to accumulate quality stocks for long term.
According to Dan Ashmore, investing expert at Invezz, "the only thing we know for a fact is that, historically, such large drawdowns often make for a good time to buy. Sure, the drawdown might be severe (and could still get worse), but over time the market is likely to rise above its current level - especially since the Fed is unlikely to remain on the sidelines if things become truly bad. With a long enough time horizon – and that is the key – it’s a nice time to buy.