Hello Friends,
First of all this article is not for trading or even short term investment. It is for those who used to hold stocks and sleep. I try to answer if they can really sleep or is it alarming time.
We have a long phrase in market, "market fall on the day everyone is bullish on it". It means market fall on most unexpected day. Second thing is, "Price has a memory".
I am highlighting some observation based on above charts.
1. Indian market has only 5 major break out of previous all time high. I am personally witnessing market from 1998.
2. Market used to retrace its rally if it breakout after multiple attempts. Look at first breakout. It hardly corrected
3. Market correct itself in two ways, i.e. Price correction and time correction and both has inverse relation.
Even with small effort you can able to understand above chart. let me give you details about each previous all time high breakout. Read it with patience.
Dates are on weeks closing. These are actually weeks.
Breakout (1) - Nifty hits a first high @ 430 (closing) on 8 October 1990. This is I am taking as base. This high broke on 22 July 1991. What has happened after that? A quick fire rally continues till 30 March 1992. It has gained almost 170% without any correction. It hit a closing high of 1236.
Breakout (2) - Nifty goes under consolidation for years. It decisively makes new all time high on 12 July 1999. (I was new in the market at that time. It was software bubble days). Rally continues till 07 February 2000 and hit a high @ 1756 with a gain of almost 39%. It was not so smooth rise.
Breakout (3) - Nifty breaks above high of 1756 on 01 November 2004 on decisive way. Then a mammoth rally started. Nifty finally hit another all time high on 07 January 2008. It gave us 242% return. Fall led by Satyam Computers scam and then global melt down due to mortgage crisis. High was 6274
Breakout (4) - Nifty crossed previous high on 03 march 2014 and rally continues to make another time till 12248. Gaining 95%. This we saw on 20 January 2020. You can say 6 years of rally.
Breakout (5) - Nifty takes out its previous all time high on 20 November 2020 and so far added 25% and it is just 7 months rally.
I can say unexpected is nothing in market and people has to be always alert in the market but dynamics is denying any great threat so fall. As this all time high taken out by market with ease and without multiple attempts so we may say that buyers are strong. As buyer are strong market may not ready to go down easily.
In my view 12500 with act as good support and any short term dip can be opportunity to buy. Equally, market may under go time correction after a significant rally. So far, market is in rally mode only and you calculate your view for top depending on economy.
Remember, trading dip are bound to come like you can see in charts but investments are still safe and can be bought in dip.
I do not think that market can be unsafe for coming years due to post covid effect. There are lots of talks of bubble in market. I say, market always have bubbles in the form of bad stocks but indices never go in bubble.
I accept that economy may struggle for 2021 but market is knowing this and any dip will be bought as above cycle is going to repeat itself.
Concerning factors for this years is -
Agriculture outcome will see dip as COVID hit this time in rural area. It will be interesting to see how market react those. Many companies will see in its earning due to above factor. Just take care about this point.
Rest is fine & Happy Investing,
Praveen Kumar
