It’s Just Another Nifty Correction or are we heading to CRISIS?
It’s been long time since I have written something on stock market and I think there is no other better time than today to write. All because of the
worries that are ruling the stock market. So, deviating from the promise that I made last week where I said I would give my predictions on Rajya Sabha polls, I am writing about markets. The reason is simple. In last one week many things have changed and many allies are deserting BJP and its not wise to predict anything as of now.
So, coming to the markets we have seen a lot of volatility in last one week. With Global Factors in negative plane and Domestic Factors adding to it the fall seemed to be immine
nt and it did happen. Investors need to very cautious at this point of time, because it is very crucial not to lose his patience and take a rash decision. I would say that this is worrying but it’s not game over yet. Let’s not panic because that will only make it worse for investors.
I have few points to discuss whic
h will make you to see the other side of the story. I have taken the point of analysis as the time when Modi came to power i.e. from May 2014.
Correction is Obvious for Long Term Growth
If you look at the table given in the image you can see that in the history of stock market every time after good bullish run we had seen a fall that is ranging from 10% to 15% on Nifty. When the stock market goes up trending by 25%-35% there is always chance of 10% correction minimum. So, the correction that we are seeing now is natural because after the
demonetization we have moved all the way
up by 40% from 7980 to 11120 and now is the time to cool down a bit.
Connecting Nifty 50, Bank Nifty, NSE Mid Cap 50 and BSE Small Cap 100
Nifty 50 is the major index that represents the Stock market of India. But there are also other Indices which are slowly gathering pace in the Stock Market. They are much riskier and have got lot of movement when compared to nifty. The average returns on Nifty for last 4 years are standing at 31.6% whereas the average fall is at -12%. Bank Nifty is with average returns of 46% and average fall of -16%, Mid Cap 50 with average returns of 45% and average fall of -13% and finally BSE Small Cap 100 with average returns standing at 53% versus fall of -14% average. That statistics shows that Nifty can mostly fall till 12% which is the lowest when compared to all other indices.
Crisis and the fall comparing to 2008 vs 2018
There are also voices which are talking about the fall going as deep as the 2008 economic crisis. In 2008 Nifty fell from 6300 in Jan to 2525 in October month. Making it a worst fall ever in the history with a fall of 60% in just 10 months. Coming to present situation, the patterns of chart look the same when compared to the 2008 crisis. But the factors that are there today are not that worrying as in 2008 and don’t carry huge weight to make the market crash as bad as 50%. The average fall of 10-12% is something that is surely acceptable and one should be able to take it.
All the voices talking about the fall due to NDA Govt and its policies doesn’t look strong. Because already in NDA Government Stock Market has seen three 10+% fall and seen huge recoveries. I would say that It’s just a correction and chances of big crash look low. That said, the target of 12,000 that we had thought of in the beginning of the year now looks very slim but its not impossible. If a 10% fall can happen in 2months then we have more 8 months for out target to be reached. So, never lose faith on the markets. Move cautiously, observe the fundamentals, evaluate the technical and use the Futures and Options wisely to make up for the money that you are losing on your portfolio!
So, cheer up India is shining!