Only Survivors Will Get A Chance To Thrive!
Le trio C’s i.e. Coronavirus, Crude Oil and Currency have cut the ground from a well-paved Dalal Street in the last one month or so. Indian rupee has depreciated to Rs 74 versus USD. It’s a grim walkway in the journey of investment with investors wealth over Rs 8 trillion was wiped off as the markets have sprinkled red everywhere. Wall Street had a down circuit, crude oil collapsed and nothing has been spared.
Nifty and Dow entered into bear markets after tumbling 20 per cent from its recent peak post World Health Organisation’s affirmation on Coronavirus being a ‘pandemic’. The news sent market participants racingfor a cover.
Further, US President Donald Trump as well as Indian Government both announced new travel restrictions in a bid to combat the spread of Coronavirus, stoking fear of global economic slowdown. This is likely to impact the earnings of airlines, hotels and other travel-related stocks. Also, a ray of hope which flickered to revive the sentiments of the markets in the recent times was the fact that US President suggested a major fiscal stimulus package, including a possible payroll tax cut and on the domestic front, aggressive rate cut by the RBI; however, a delay in announcing measures has exacerbated the fall.
Now, with the correction in the headline index- Nifty being over 20 per cent from its lifetime highs, the market has entered into category II phase of corrections. Category I correction was limited to 11-15 per cent, which occurred in 2013, 2016, 2018 and2019. Category II corrections are between 25-35 per cent. This correction occurred in 1998, 2002, 2004, 2006, 2010 and 2015. There are only two category III corrections in the year 2000 and 2008 as the market corrected 58 per cent and 62 per cent, respectively.
Right now, the market participants are seeking answers two important questions. First, where this Coronavirus is headed? And secondly, is this the right opportunity to average or buy stocks? Interestingly, answers to both these questions are connected. Well, first of all, we would say that with the market entering into a confirmed bear territory, it is better to avoid catching the falling knife. None of us know where the actual bottom is and we can only survive the present by not predicting or trying to catch a bottom. Let a rebound begin first and this will happen with the peak of virus. After a rebound begins, next let a pullback come and buy on a higher bottom. Hence, it’s better to act on the movement and wait for the first evidence of that right movement in the market. Further, we have mentioned about category II phase of corrections and we believe that we are in that phase of correctionwhere an average of 25 per cent correction is possible as history suggests and if we calculate Nifty target, we would be in the range of 9,300-9,400 levels.
Further, we would like to advise our reader to use this time to look for the stock and add to your watch list, so that you’ll be ready to act when the market starts reversing in sentiment and trend. You’ll find that year after year, winning stocks liftoff their big advances at the start of a new market uptrend and so, make a list of stock that are able to hold support and have relatively outperformed in this mayhem.
