Q&A_ Is market waiting for a deep correction? My view.
Definition:
India VIX is a volatility index based on the NIFTY Index Option prices. From the best bid-ask prices of NIFTY Options contracts, a volatility figure (%) is calculated which indicates the expected market volatility over the next 30 calendar days.
Here you can see the weekly chart of India Vix. You must have noticed that whenever the Vix touches 10% levels, it bounces off. This has been happening since 2014. So, Vix generally means "expected market volatility (or say movement) over the next 30 calendar days". Nifty is wandering around 16000 levels and 15500 levels since June. It means buyers are not interested to buy. They must be booking the profits.
So, if the market has to move up, then "Vix must fall below 10% levels". But "we have a very strong support at 10% levels". Of course it may go little below 10% levels (like it did on 19 Jun 2017 to 8.75%). But the point here is if the market has to move up, then Vix must fall. Hence I am expecting a deep correction. This is not supported on charts only, but as well as fundamentals aspects (like Nifty moving above 28 PE), share prices are really expensive, euphoria, new trading accounts opened and enjoying the bull market, etc.
Exception: The strong bullishness in S&P 500 (or say US markets), can easily affect the Indian markets. If there is "euphoria" on US markets, it's everywhere. Hence Nifty can move even higher.
Conclusion: I am not saying to just go short (or sell off your shares), if you're an trader, good. But if you are an investor, just think and analyze more. Of course there are stocks that are undervalued, you can invest a little there. But, the blue-chip stocks, I won't advice it for investing now.
You get best prices when "there is fear, there is an uncertainty, there's a panic". Always saving your money for that time (for investing) is crucial.
Disclaimer: The information and analysis I've provided is of my own, please do your thorough analysis and/or consult your financial advisor before investing. The investing in securities markets are subject to market risks. I am not a SEBI registered investment advisor. Thankyou for reading and I wish you a happy investing.
India VIX is a volatility index based on the NIFTY Index Option prices. From the best bid-ask prices of NIFTY Options contracts, a volatility figure (%) is calculated which indicates the expected market volatility over the next 30 calendar days.
Here you can see the weekly chart of India Vix. You must have noticed that whenever the Vix touches 10% levels, it bounces off. This has been happening since 2014. So, Vix generally means "expected market volatility (or say movement) over the next 30 calendar days". Nifty is wandering around 16000 levels and 15500 levels since June. It means buyers are not interested to buy. They must be booking the profits.
So, if the market has to move up, then "Vix must fall below 10% levels". But "we have a very strong support at 10% levels". Of course it may go little below 10% levels (like it did on 19 Jun 2017 to 8.75%). But the point here is if the market has to move up, then Vix must fall. Hence I am expecting a deep correction. This is not supported on charts only, but as well as fundamentals aspects (like Nifty moving above 28 PE), share prices are really expensive, euphoria, new trading accounts opened and enjoying the bull market, etc.
Exception: The strong bullishness in S&P 500 (or say US markets), can easily affect the Indian markets. If there is "euphoria" on US markets, it's everywhere. Hence Nifty can move even higher.
Conclusion: I am not saying to just go short (or sell off your shares), if you're an trader, good. But if you are an investor, just think and analyze more. Of course there are stocks that are undervalued, you can invest a little there. But, the blue-chip stocks, I won't advice it for investing now.
You get best prices when "there is fear, there is an uncertainty, there's a panic". Always saving your money for that time (for investing) is crucial.
Disclaimer: The information and analysis I've provided is of my own, please do your thorough analysis and/or consult your financial advisor before investing. The investing in securities markets are subject to market risks. I am not a SEBI registered investment advisor. Thankyou for reading and I wish you a happy investing.
Comment:
US markets, Global markets at all time high!, so as Indian market. Euphoria!
Comment:
You must have noticed that whenever the Vix touches 10% levels, it bounces off; In the last 15 years, the NIFTY 50 index delivered a nearly 12% average annual return. Conclusion: It has a co-relation.
Comment:
Disclosure: I am short on Nifty50 via options for the next year.
Comment:
I expect anyone who is reading my writings to know that there is nothing "certain" in the markets. Neither the %gain on stock nor "out-performance" or "under-performance". There is a risk and opportunity cost involved in both, buying and selling. Selling at any price can often result in "opportunity loss" when the stock moves higher and higher. Human psychology is a culprit here. For e.g. I post any stock which seems undervalued or overvalued to me on tradingview. When anyone makes money on that, they wont appreciate me "a single word". But when they lose or it results in opportunity loss, they are bound to blame me. I don't criticize any person, because I know their psychology has defeated them. At last, there is nothing like "easy money" in the markets. The survival of the fittest holds absolutely true here.
Comment:
One other example of a culprit human psychology. I am short on Nifty50, so I started looking for reasons of market falling. I found that there is a pneumonia outbreak in China recently. It felt me happy because I was short on Nifty50 and it may result in falling market (correction). But, is it humane? Praying to god to make people die, just to make some money in the short position? It felt really bad after realizing this. May be that's why the god made bull markets more often and more lasting (time) than bear markets. Pessimism is short-lived whereas optimism lives longer. Optimism always wins in the long term. Take for instance a glass half-filled with water. You can't get or achieve anything seeing it half-empty. But, you surely achieve something seeing it "half-full".
Comment:
I am not a financial expert and everything I am saying is based on my understanding and opinion. Take everything I am writing as a grain of salt. You must consider your financial advisor before taking any actions. DJI and Nifty50 have hit all time high, whereas S&P 500 did not yet. I did not make anything substantial in the year 2020 by buying at a discount. And I think many of the investors couldn't have as well. Anyways, lets calculate the returns of DJI, SPX & Nifty50 since Dec 2020 till Dec 2023. DJI +23.14%, SPX 26.98% & Nifty 50 +55.42%. Now subtract them with FD rates (India has 7% and I don't know about USA, lets take 3%). So, after deducting FD returns for 3 years, DJI +14.14%, SPX +17.98% & Nifty50 +34.42%. -10% correction is more often than -20% corrections. So, let's take -10% correction every 1-2 years and -20% correction every 2-4 years. My point here is, markets hitting all time high, it's very good, but you can not rule out corrections. If, by any chance we could buy at correction (say 19-30%), we would be standing at the same level as the guy who bought on 31 Dec 2020. But, it's a tough nut to crack for most people. Do you think money makes money in the market? Then, you're wrong. Patience makes money in the market. It's not a sell advice either. The point I want to make is, when we're patient enough, the market have a very big heart and it might give us another chance to buy. But, it demands one thing for sure, "patience".