By Col Sanjeev Govila (Retd)
Nifty 50 is down practically 18% from its all-time highs of 18,600 seen final yr in October. And most of this downturn has occurred inside this yr. Technically, the markets have been down for greater than 8 months now. So, we’re simply 2% away from formally being declared to be in bear markets.
The celebrated US investor, Jim Rogers, difficult the issues just lately by declaring that this market would be the worst bear market of his complete life-time. A widely known Indian economist went a step additional saying that the US is just not shifting in direction of recession – it’s already in recession!
On the opposite hand, Indian markets haven’t fallen as badly as the worldwide markets – US Nasdaq 100, the bellwether of tech shares worldwide, is down 34% from its highs of Nov 2021 and the broad-based S&P500 is down by 22%. Indian markets are withstanding the shocks of inflation, commodities, oil and every little thing else significantly better.
What do you, as a retail investor who has been listening to all these voices, do now? Is the market about to worsen or is the market about to go up and you’re more likely to miss the bus as soon as once more should you wait and the markets gallop forward?
Let us first see why did the markets right after one of many largest bull markets of all occasions?
Receding Covid opened up the world however the supply-side dynamics are taking their very own time to catch up. Economies are awash with money pumped in by the central banks and Oil politics is in full bloom with the Russia-Ukraine struggle not making the issues any simpler.
The situation is ideally poised for an inflation bloom, which is now all over the place you can see. The US simply noticed its highest inflation price prior to now 40 years and no financial system is untouched by the Growth Vs QT (Quantitative Tightening) dilemma. As the central banks all over the world wrestle to rope in inflation and save their economies and inhabitants from its results, firms will face difficulties in rising and reporting respectable numbers. This is what’s roiling the inventory markets.
Is there a straightforward resolution to this? There is none, sadly. Liquidity and provide facet points, and therefore controlling the inflation, will take their very own time to be sorted out. The markets will solely stabilize once they see some mild on the finish of this tunnel. Hence the ache that has to happen will happen.
This is just not the time to promote because the Indian markets have come down fairly a bit and the Price-to-Earnings ratio is as soon as once more coming to rational ranges, standing at round 19% now. But this isn’t the time to go forward and empty your purse too since no one is aware of how far more the markets are planning to go down.
Indian financial system has positively been far more resilient on this full cycle than the US, European and different economies of the world, because the numbers clearly depict to date.
With the underside not identified however the ratios turning into fascinating as soon as once more, most analysts consider that we’re not far-off from the underside in Indian markets not less than. That is why it’s now turning right into a slugfest – and the winner would be the one who can lower out the noise, wait patiently with dry gunpowder prepared, management personal thoughts and feelings, and transfer in when the markets begin giving a sign that sufficient is sufficient.
Nobody can ever predict a backside and in reality, no one will even come to know when the markets hit the underside – it’s going to solely get identified a lot later.
So, you might have two methods to go by. Either begin shopping for in small tons round 14,500 Nifty which had fashioned a very good technical assist in April 2021, Or, anticipate a decisive backside to be fashioned after which begin your shopping for with a transparent information that such a technique may additionally imply that your shopping for may begin at larger ranges a lot after the decline within the markets has reversed.
Do not give in to any panic in shopping for the upturn. The causes which precipitated the market downturn will take their very own candy time to be sorted out – as they are saying, markets took an elevator to come back down however will take the steps to climb up.
How properly you play the sport is totally depending on how properly you rating within the persistence take a look at, slicing out all noises and rein in your feelings.
(Author is Certified Financial Planner, CEO, Hum Fauji Initiatives)
Source: www.financialexpress.com”