16th March 2020-Monday

Hi readers

This article is written to share some of my personal views based on the fundamental and technical knowledge, what I acquired in the last 15 years of experience in the stock market as a full time analyst and not to panic any one, I have witnessed/seen the worst market corrections during 2006,2008 and now 2020.

Covid-19 (Corona Virus) panic becomes pandemic across the world, will not leave India to isolate, the death toll raised to two casualties as on date,  it seems most of us not bothering about the seriousness, taking very lightly. But many states really understand the consequences and taking preventive measures to control the casualty in a right spirit.

Why I am writing about Covid-19, because of the world economy depends on the domestic demand and supply, imports and exports across the world, if the supply chain and distribution systems are affected, the chain of reaction could affect each and every country which leads to the major recession, It looks like the world economy entering into the major recession if, Covid-19 spreads further and the casualty rates are rises..

Big brother, i.e.,USA, announced/declared Covid-19 as a national emergency and allocated $50 billion dollars to handle the situation, the US FED reserve slashed the Interest rate by 100 Bps i.e. 1% to keep the rate between 0.25  to zero percent to tackle any situation on the sinking economy and it's gone one step further, to take preventive measures such as, banning the travel to 26 European countries and also other countries, which are mostly affected by Coronavirus and cancel the visa process from 16^th  March, no visa will be issued in India to travel the USA.

This Covid-19, triggers a sell-off across the global equity market, almost all the world top indices were corrected upto the range of 10%-30%, it had not left the Indian equity market too, the FIIs are selling spree almost every day since, Jan’2020, they pulled out Rs.52,229.83 crore by net sell-off in the Indian equity market, as of 16^th March’20..

But, I see this as just a beginning, the major correction which is a long due, should have happen earlier, but the Covid-19 played just as a trigger point.

Now, the big question is lingering in every one’s mind is the ongoing correction has ended with a low made on 13^th March-Friday i.e. 8555.15 or  is it just a beginning?

We analyse this in deep to get more clarity...

The Indian equity market, especially the Nifty index, the way it moved from 2008 low and reached the all time high 12430.50 on 20^th Jan’20, the bull run was intact and not given any reasonable correction since 2008 after it made a low 2252.75, almost 12 years completed by now. Any good move to sustain for a long run, should have reasonable price and time correction in every 5 or 8 years cycle, but Indian equity market not witnessed any meaningful correction during this 12 year and moved up with more optimism in last three years.

Though, Indian economy is not supported the equity market move this time, it was driven only by mere optimism and greediness with selfish motive, this was evident by the Price Valuation (PE), it was touched the unprecedented level at 28.67 times, moreover the micro data such as Industrial production and GDP numbers were continuously moved southwards direction, but the Indian Equity markert marched northwards without sync with the economy and micro data, finally fooled the Investors by correcting all of a sudden, more than 30 percent from the all time high in just 39 trading sessions whereas, it took 303 trading sessions to reach the highest level 12430 from the low point 10004.55 made on 26^th Oct’18.

I see this correction as just a beginning, the pullback after the nightmare on 13^th March lower freeze, the Nifty Index managed to recover and closed near 9950, this was anticipated on 11^th March’20, I had written the time correction may end the first leg on 13^th March, as per time series analysis. As written, it had happened and made an Intra high on 13^th March till 10154, unable to sustain and once again opened with a gap down today-16^th March, the weakness again pushed the Index to 9165 and lost 7.61 percent, ended with negative bias.

Are we entering into the major recession?

The symptoms and inputs what i am getting from all the sectors, data and talking to the different people in various fields confirms that, we are entering into the structural correction. I have not just concluded on the basis of the input, what i have received but mostly followed and analysed all the sectors, which are also confirmed the same.  In a normal equity market correction,  the bullion market i.e. Gold will shine,  whenever the Equity market corrects the Gold price will move up and Crude oil also may move up, when the economy get in to the recession the clear signs are all equity, metal.sector, Crude oil and Gold prices  will come down, we are experiencing that now, resembling 2008 crisis. Gold prices were moved recently to highest level as a safe heaven, but from last week, it has started to coming down along with the equity and crude price, metal price are also moving southwards. Realty prices are moving down heavily, no takers, even in a conservative states like Tamil nadu, the prices are slashed never before.

As per the Elliot wave theory, though Indian equity market not always trade as per Elliot wave principle as described by Elliot, many a times it truncated the wave count giving false move to confuse the trader/investor and wave technician, but this time the wave theory also confirms that, the 12 year bull cycle ended it’s, 5^th impulse motive wave completed with ending diagonal pattern and started the ABC corrective wave to test 38.2 to 50 percent from the record high 12430, hence the Index may correct in the coming sessions till 7987-6825-6615 levels, if ABC corrective wave may even extend its move with 1-2-3-4-5 pattern to correct beyond 6615 to test 6357-5242, if the economy worsen further.  This anticipated correction may not reach the low levels mentioned above, all of a sudden rather, the Nifty Index may consolidate between 10000-8555 for some more time,  based on the weaknesss below 8555 then, further sell-off may push the Index till 7987-6825-5242 levels.

Some may not accept this view, especially those who follow and track the Nifty move on a weekly chart or monthly chart, may argue that, this is the fourth corrective wave in progress, may believe that still,  5^th wave is due to complete with a target near 14k.  But,  I may differ with them, I have gone one step further, analysed quarterly and annual chart, which will reduce the unwanted noice in the wave count, gives us a crystal clear wave pattern and confirms that, the ongoing correction is got a potential to correct 50 to 61.80 percent of the entire move from the low point 800 to the highest  point 12430, which lies at 6615-5242 levels. This view may negate only when, the Nifty Index trades, sustain and closes above 10640 for three consecutive trading sessions with a weekly closing basis above 10640.

The trader/Investor may invest for long term perspective in top Nifty 50 stocks in the sectors viz., IT, FMCG, Auto, Pharma on selective basis and book profit partially then and there and avoid metal, Infra, realty, banking and PSU (Public Sector Undertaking) stocks.

I personally request the readers, to forward this article to your near & dear to get benefitted by reading this and it may help them in many ways.

Please read carefully, the Disclaimer published on the Disclaimer page. Wishing you for a safe and secured trading.