NewsStocksInvestor Capitulation in Indian Equities Creates Buying Opportunities, Says Sunil SinghaniaInvestor Capitulation in Indian Equities Creates Buying Opportunities, Says Sunil Singhania
Sunil Singhania of Abakkus Asset Management identifies investor capitulation in Indian equities as a buying opportunity, with panic-driven selling and stocks hitting fresh lows indicating peak fear. While direct investors face losses, SIP flows remain resilient as mutual fund investors stay invested. His team is investing aggressively in companies with visible profit growth and reasonable valuations, expecting no major earnings surprises this quarter but noting stable corporate balance sheets and macro indicators despite constrained profit growth at 9-10%.
*this image is generated using AI for illustrative purposes only.
Investor capitulation is setting in across Indian equities, creating conditions that signal it may be time to start deploying capital, according to Sunil Singhania, founder and CIO of Abakkus Asset Management. He believes panic-driven selling and a surge in stocks hitting fresh lows suggest fear is peaking in the market, presenting potential buying opportunities for strategic investors.
Market Sentiment and Investor Behavior
Singhania observes a clear deterioration in market sentiment, particularly among direct investors. "The sentiment among investors isn't great. Direct investors have not made any money — in fact they've lost money — so sentiment is obviously hit. There is a capitulation happening in the market," he explained.
However, systematic investment plan (SIP) flows demonstrate remarkable resilience during this turbulent period. Mutual fund investors have largely maintained their positions and avoided significant losses by staying invested. "People have not lost money in funds as they stay invested, so those investments will continue," Singhania noted, highlighting the stark contrast between direct and mutual fund investment approaches.
Current Market Dynamics and Outlook
Despite recent market nervousness, Singhania believes multiple macro and market parameters are beginning to stabilize. He acknowledges that the year has started with considerable news flow and concerns, creating challenging and stressful conditions on the surface. However, he identifies signs that fear may be reaching its peak.
| Market Parameter | Current Status |
|---|---|
| Corporate Balance Sheets | Steady and healthy |
| Macro Indicators | Stable |
| Profit Growth | Constrained at 9-10% |
| Earnings Outlook | No major surprises expected |
Regarding near-term earnings expectations, Singhania maintains a measured outlook. "There won't be any positive surprises this quarter, nor will there be disappointments. But there will be an impact of the new gratuity rules on earnings," he stated. The external environment continues to constrain profit growth, with earnings currently stuck at around 9-10%.
Global Economic Perspective
On the international front, Singhania observes what he describes as "Trump mania" appearing to peak, with resistance building across major economies. He notes that while the US currently represents about 25% of the world's economy, this could decline to 17-18% over the next 10-15 years. "Today nearly 75% of the global economy is in sync that this has gone too far," he emphasized.
Singhania highlights several developments that could reset market expectations, including discussions around a potential large free trade agreement between India and the European Union, along with the upcoming Union Budget.
Investment Strategy and Approach
Given the current market conditions, Singhania's team has already begun increasing investments aggressively. "Looking at the fear in the market, I would really say it's time now to start investing. We are certainly doing this. Over the last week we have been investing aggressively," he revealed.
The investment strategy focuses on specific criteria for stock selection:
- Companies with visible profit growth
- Stocks where valuations remain reasonable
- Value opportunities across market capitalizations
Singhania emphasizes that opportunities are not limited to specific market cap categories, noting that even large-cap index stocks have experienced significant declines of more than 10% over recent weeks. The small-cap correction particularly reflects earlier multiple expansion without corresponding earnings growth.
Market Risks and Forced Selling
Singhania warns against momentum chasing, describing it as a double-edged sword. "Momentum is very pleasing if you're on the right side and equally painful if you're on the wrong side," he cautioned. He observes that stocks investors eagerly sought three to six months ago are now being avoided as prices decline.
Forced selling mechanisms contribute to accelerating market declines. "Margin funding trades get unwound, particularly in the first two to three hours of trading. That kind of forced selling always happens," Singhania explained, highlighting how technical factors can amplify market movements during volatile periods.
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