1. The foremost stock market bottom indicator
The markets in their current state are extremely fearful. So, an investor who follows Buffett’s advice – “Be greedy when everyone is fearful and be fearful when everyone else is greedy”, would benefit from buying in the current market conditions. Markets have tanked to a great extent right now. Buffett followers are estimating as how much more the markets will fall and when would the rally begin.
However, the saying ‘Never time the markets’ is also true. It’s impossible to say when the carnage on the D-street will end. It is very difficult to figure out the bottom of the market.
A fair indicator of reversal in the markets could be a lower freeze (circuit breaker) when no one is interested in buying and there is negativity all across the market. Nifty 50 had one of its the biggest selloff on March 13, which resulted in a lower freeze (circuit breaker). Markets rebound from the circuit breaker, soon after the circuit breaker opened, but could not hold the rally for long and plunged back to the below 8500 mark in the next week. Over the next week, the markets plunged even lower steadily. Let’s look at the reasons for the same.
2. Global Events- a prominent stock market bottom indicator
The equity markets have been experiencing huge volatility all across the world and the situation is no different with the commodities and currencies market. The week began with a huge crash in oil prices after the end of cartel between Russia and Saudi Arabia. This will surely mark the beginning of a price war between the two largest exporters of oil. Oil is one of the major tools involved in controlling the economy.
Technical Reasons for the Downfall
Nifty 50 closed the week on lower levels, the overall week proved to be very volatile and the index tested the 100-month EMA on the monthly chart. This looks like an overreaction clouded by Coronavirus and global selloff in equities. However, there has been a slight increase in the volume, which confirms that panic selling is almost over in the markets. This can be the formation of a short-term bottom.
3. Expectations from the governments for revival and reversal
The governments across the world are trying to boost and revive the market sentiments by injecting liquidity and reducing health concerns across the economies which have risen due to the sudden outbreak of the Novel Coronavirus. It is expected to bring back market stability. The stock market bottom indicators have indicated the same.
This looks like a great opportunity for investors to invest in quality compounders for long term and earn profits. There are various sectors like consumer durables, FMCG, IT etc. which can be a potential bottomed out stocks to buy. However, cyclicals such as metals and PSUs should be strictly avoided.
There are various bottomed out stocks to buy which can prove out to be a steal deal for the investors once the markets revive. But it is recommended to have your risk profile analysis done and updated before you plan any sort of investment. Investing in the market comes with its own set of risks. The current scenario looks like an opportunity for bottom fishing of the bottomed out stocks.
The current market scenario requires very thorough analysis before taking any decision. The high level of volatility as increased the risks in the markets. In the current scenario, it is recommended to stay safe both physically and financially. It is not at all advisable to enter the current markets without proper analysis and research.
