The BSE Sensex and Nifty are trading near 13 months low and have declined 17% from the 2015 High which we saw on 04 March 2015. In Just 6 months Stock market have wiped out the gains made in past 13 months.Let me put the reason from both Technical and Fundamental Perceptive Sensex corrected by 500 points Nifty almost 200 Points making today as Black Friday.I am discussing few points below which would had led to the correction.
1. Fundamental
- Concerns over Fed rate hike
Equity Market likes liquidity, Friday Strong US jobs data and Unemployment rate coming sub 6% fueled expectations that the US Federal Reserve may raise interest rates sooner than previously thought.
- Expensive valuations of Stock Market
Valuation for Indian markets at 19.4x on FY15E (16.6x on a rolling one year forward) and 22.5x on CAPE basis which are above long-term averages.
- No Pick up in Earnings growth
Dollar gaining strength
The dollar index is gaining strength against basket of currencies including rupee. Yesterday Mario Darghi has also said to increase QE which will further weaken Euro and Dollar will rise is due course.
- Slowdown caused by China and Yuan Devaluation
Global stock markets are tumbling after a survey showed Chinese factory activity contracted at their fastest pace since the depth of the global financial crisis in 2009. Fears of a China-led global economic slowdown drove Wall Street, previously seen as a safe-haven, to its steepest one-day drop in nearly four years on Friday.
- Rupee at lowest since September 2013
Rupee slumped to as low as 66.48 per dollar on Monday morning. It is lowest since September 2013, as Asian markets reeled under fears of a China-led global economic slowdown.
Technical Reason
- Trading below 200 DMA/8000 Level : Nifty/ Sensex are trading well below its 200 DMA, putting pressure on market, as many FII’s have 200 DMA benchmark for buying or selling.Break of sacrosanct level of 8000 and closing below it for 2 week is sign of weakness.
- Gann Date Effect- As discussed in Weekly Analysis Gann/Appoint and Gunner plays an important role in finding impulsive move, all studies were pointing towards a big move.
- NF opening volume in first 15 mins was 25 Lakh highest seen in past 2 years suggesting serious long liquidation by smart money.
Lots of writeups are seen in various quarters on WHY nifty has fallen but hardly any one could indicate that there would be such a great slide beforehand. All the factors being analysed for fall did not happen in one day but were happening over a period of time yet no one could indicate firmly the direction of Nifty. Even now also nobody knows it will go further down or will move up.That’s the reality of Markets where one can do only do a postmortem of the events and no study or technicals can give more than 50 % probability of the movement of Markets. Only time tested method is to pick companies at early growth stage and stay invested for long term which will have a better probability of success. But that needs some real financial analysis on valuations and inside information from companies which is bit difficult for normal public. That is why it’s a fact that in markets 2% make money from 98% of traders who invariably make losses and complicate themselves with so many technical analysis and keep finding reasons as to why market moved opposite to their expectation
hi bramesh your analysis is really great.i must thank u for giving levels for intra day trading.
it is very helpful and i am able to make some profit.similarly ur general articles also boost to
all traders..whenever we feel down hearted it is like medicine.thanks for all this.keep posting.i wish u great future for u.by the way i am a lawyer aged 70 years keeping occupied in the market for past 6 years.now only i am gaining confidence and doing better.
Gann is gunned down pathetically
excellent !!!
Grt… analysis sir..once again proved to be master…
Thank you sir
Last hope for bulls 7460
Excellent Analysis
Gann time cycle is positive till mid September but nothing positive happened till now. Any hope in next few weeks?
Good post analysis. Interesting read.
GANN DATE has once gain proved correct
Excellent write up.