Nifty Down With Corona

Nifty saw one of the most significant meltdowns since, 24th Aug 2015, then, Sensex fell 1624.57 points and on 28th Feb 2020, we saw a nosedive of 1448.35 points.

Every breakdown has a reason, most of the times strong and compelling enough to make institutes, investors and almost everyone conclude that this is the end of the Bull Run.

Now let us break this situation and make it simple to understand:

History Repeats Itself:

History keeps repeating itself and if we do not learn from it. We will keep making the same errors:

Has such an event occurred in the past?
Yes, multiple times.
The below chart will help you understand.

Since Jan 2020 Nifty has come down by 9.88% from its peak, reasons can be many however, history will remember this fall as Corona Virus fall.

All major breakdowns due to virus emergencies have lasted from a few weeks to a few months.

Stocks come back and everyone forgets what happened.

Obviously, everybody repents not picking up good stocks at that discounted level. 

Similarly, with the Corona Virus, a solution will be found sooner than you expect.

All good stocks will come back to their previous levels making new highs, not immediately but definitely. 

Let us look at virus impact with the data that is available

Now, let us come back to our pain point: NIFTY!

The above image, we are looking at the weekly chart of Nifty the Yellow Line is the 100 and Redline is the 200-day simple moving average. 

Here, the Yellow stars indicate the occasions when Nifty took support at 100-days SMA. 

Today Nifty is leaning on the 100-days SMA, the market may bounce or break it, only time will tell.

If selling pressure breaks this level, we will move to the next major Line OF defence 200-days SMA.

In the technical world, the 200-day average is considered to be the strongest line of defence and we can see its strength from the chart.

Last 10 years, Nifty could never break this defence.

Between these two levels, we have a spread of 930 points.

Of course, to complicate, experts can add at least Ten thousand technical points and come up with One Hundred thousand observations. 

I believe in staying away from noise and complication. 

Keeping things simple and making a workable observation is my strength.

The Simple way ahead:

The above-mentioned method works on most of the major stocks with some minor or no changes at all.

We should have a list of focus stocks, that we intend to hold for a long time. (This stocks should have some basic features, will keep that for a future discussion)

Once these stocks trade at a discount of 10 to 15 per cent we should start accumulating them.

The discount level should be decided pre-market hours so that we can act swiftly when our levels arrive.

This is a boring but highly effective strategy. 

Remember:

Only two Individuals can tell you the bottom and top, they say One is God and the second one is a Liar.

I am neither God nor Liar.

The prediction above is a mix of pure mathematics and past observation.

Stocks from my Focus List that are currently available at discount:

Investment Hygiene learned over time:

Have a Target before you invest and book your profits once they arrive, the stock will come down (5 to 10) % from its high you can buy again

The same rule applies to loss.

This will stop your profits from running into losses. (have a stop loss in place or cover your positions)

Be as willing to sell as you are to buy.

Picking the bottom is a game you will always lose

Never be 100% invested in equity 

Staying away from Television may be a good option

COURAGE DOESN’T ALWAYS ROAR, SOMETIMES COURAGE IS THE QUIET WORD AT THE END OF THE DAY SAYING "I WILL TRY AGAIN TOMORROW”

This is my personal view and you should not make any move without consulting your advisor. The intention of this article is only to educate.

Ideally, every advisor should make similar efforts to keep their clients informed.

Right information, helps you take Right Decision