Swan Energy, HDFC Bank, Jio Financial: Which stock to buy on correction? Here’s what analysts suggest

Broader indices on Dalal Street have witnessed a massive correction in the past three trading sessions. The BSE Smallcap index has tanked nearly 8% to an intraday low of 41,167 on March 13, 2024, from 44,654 on March 7, 2024. Similarly, the BSE Midcap index also tumbled 4.5% during the same period. On the other hand, the benchmark equity index BSE Sensex declined by 1.5%.

Amid the ongoing selloff in the broader space, market watchers believe investors should follow a stock-specific approach, as most sectors and stocks appear overvalued. The level of overvaluation is particularly high in the case of low-quality companies. So what to expect from broader space and which stocks one should buy at present?

Kranthi Bathini, Equity Strategist, WealthMills Securities said while there may be some areas with excessive speculation, the key is to focus on individual stocks. Investors should be specific about their stock choices and understand the inherent risks associated with investing in mid and small-cap stocks.

“The recent frenzy in these segments highlights the importance of recognizing the high beta nature of mid and small-cap stocks. These stocks are highly responsive to changes in regulations and market sentiment, exhibiting hyper-volatility. Before investing, investors must comprehend the consequences of high beta stocks and the nature of volatility in this space,” he said.

Inflation, monsoon forecast, rural recovery, policy decisions by central banks and upcoming general elections are key monitorables in the near to medium term.

G Chokkalingam, Founder, Equinomics Research and Advisory said, “I am still optimistic about the overall market. We expect the market to hit $5 trillion in overall value (total market cap) most possibly before the general elections. However, I am nervous about a vast majority of small and mid-cap stocks as valuations are extremely elevated. Smallcap index may correct another 5%-10% minimum. We like stocks like HDFC Bank, Jio Financial, Indoco Remedies and Sterling Tools.”

On the other hand, Bathini added that investors can add stocks like NLC India (formerly Neyveli Lignite Corporation India Limited), Swan Energy, Cochin Shipyard and Sula Vineyards in case of further correction in the broader market.