The slump in Sensex and Nifty has dented investors' confidence, but valuations have become attractive. A number of experts, who have been predicting a bottom for domestic stock markets, asked investors to use the current weakness to buy quality stocks.
However, market expert Ajay Bagga says it's very difficult to predict when the carnage in equities will come to a halt, considering the turmoil in global markets.
"Cannot say whether the selloff is in the final stage as it is global selloff... Wisest people like George Soros are calling it repeat of 2008. China's currency issue is big as $100 billion have gone out of Chinese reserves. European banking issue is turning quite ugly by the hour and there is a risk of contagion," Mr Bagga told NDTV Profit. (Watch)
In India, corporate earnings are not recovering and government is not doing much on the expenditure front, he added. The recent carnage in stock markets could be the beginning of a broader selloff, Mr Bagga warned.
"There can be a temporary bounce, but the market is going down. Staying on side lines is the best strategy. One should stay liquid and sit on cash and do not invest in asset class right now," he said.
On the selloff in state-run banks, Mr Bagga says, "Overall PSU numbers have been even worse than anticipated. Slippages are worrisome; a look at provisioning coverage ratio gives a sense how much more the hole (in banking sector) is going to increase."
He said the government needs to take "decisive" action when it comes to state-run lenders. "The government has to set up a mechanism to fast track ARCs (asset restructuring companies) to take over bad assets so that banking system can start functioning again."
Mr Bagga said PSU banks should be a "no-go zone" for investors. "It is not value pick rather it is a value trap. It is better to selloff PSU bank shares if one is holding them," he added.
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