Home > NIFTY Strategy > Why is market falling so much?

Why is market falling so much?

Monday, January 21, 2008 Leave a comment Go to comments

Just as the markets were going up for no “particular reason” for the last 2-3 months,the same way they are coming down for no “specific reason”.

“Greed” and “fear” are the only things which can explain these moves. In my earlier post, I had written about a bubble being built in many of the stocks(greed) and today was the day when that bubble finally decided to burst(fear).

This correction might turn out to be similar to the one we had in May 2006 especially in the small cap/midcap stocks. One must be prepared for a 50-80% erosion in value of many stocks.

Technically- 5000 is one important level that needs to be watched out. Below that a slide to 4500 cannot be ruled out. In short term, a bounce to 5400-5500 is not ruled out.

At the same time, I am not seeing any evidence of strong buying at lower levels. Neither did I see it today nor did I see it on Friday. FIIs are in a mess because of subprime issues, so they have no option but to sell their EM positions.

All what might happen is-exit on rise!

Things shall eventually settle down but its difficult to say as to how long will it take.

I feel that we need to be mentally prepared for difficult times ahead. We need to be patient and be ready with our strategy.

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Categories: NIFTY Strategy
  1. seriouspranav
    Thursday, January 24, 2008 at 4:49 pm

    @ Murtaza

    had a hint that it was gonna fall(due to more losses, and this time in greater quantity, reported by US banks due to subprime crisis), but i was never sure, because these are the stockmarkets. nothing is predictable here…… even the magnitude of fall is not predictable!

  2. sagecapital
    Tuesday, January 22, 2008 at 11:05 pm

    Murtaza- Lets admit the fact that medium term uptrend has been broken.
    In short term 4450 might be the bottom we might have seen but I won’t be in a hurry to buy as downward risks are higher.
    Just like stocks overshoot on the upside, they can overshoot on the downside also!
    No price is too low in this market.
    Check out Infosys which hit a low of 1160 today-that is about 50% from its all time highs!

  3. Murtaza
    Tuesday, January 22, 2008 at 11:01 pm

    Sage,

    Since the FII are moving out royally in terms of dollars, it will affect the rupee dollar equation and the rupee may sink a bit.

    Again, on the contrary, a .75 bps cut in the interest rates would bring in more dollars.

    Now how would that move and how will it affect us — what lies ahead …

    Will the FIIs pump in as fast as they pulled out? Will the retail buy the FII story again? Will the rupee plunge again? Will the IT stocks move up with the rupee plunge?

    Any ideas u can drop …

    Murtaza

  4. Murtaza
    Tuesday, January 22, 2008 at 10:39 pm

    @seriouspranav

    ‘it was well known it was going to fall and lose about a 3000 points(sensex) or so ‘
    from where did u get the info? were u informed beforehand by someone?

    Today I was talking to one of my suppliers (he too trades) and surprise, surprise, he told me that another circuit was supposed to hit at 1pm, and truly approx around those times the mkt plunged to 13.8% and then the terminals were blocked, internal buying came in and the rest everyone knows.

    Informed are many like you and my supplier and some more ….

    Now what lies ahead, more pain or some gain?

    Murtaza

  5. sagecapital
    Tuesday, January 22, 2008 at 7:54 pm

    JK- Sometimes simple analysis is more effective an useful.

  6. JK
    Tuesday, January 22, 2008 at 5:57 pm

    i dont know abt the us recession but i know that sage came to know from his trend that market was gonna go down that is sure from reading his posts over few days ,he could sense the fall and saved many from over exposure to markets
    jkunal

  7. seriouspranav
    Tuesday, January 22, 2008 at 1:49 pm

    it was well known it was going to fall and lose about a 3000 points(sensex) or so due to US recession…….

    except that it fell more than that!!!!

    its also known that markets are totally dependent on US at the moment(due to huge FII inflows in the last 1 year)….

    check out the news on whats happening in US and reaction to Bush’s economic package, and one will realise that the fall is not yet over…..
    This is probably just the beginning……unless Govt. does something about it or Bush economic package shows sudden approval and success!

  8. Monday, January 21, 2008 at 11:43 pm

    I feel its fallen too soon and there is chance for the relief rally.

    Some screaming buys at this point are
    1. Aurobindo Pharma
    2. Patni
    3. Venkys
    4. Madhav Marbles.

    Disclosure : I have (1) & (2), advised clients to buy (4)

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