When I look at market movements, I am reminded of Jaspar Bhatt’s show ‘Ulta Purta’. Everything has become Ulta Pluta.
Gautam Shah: I understand the sentiment, but there have been times in the past few years when it hasn’t been Ulta Pluta, and the trend couldn’t have been more beautiful. You could have captured almost every stock, every sector, every trend in the market as cleanly as possible. So this is classic mean reversion. I mean, I know everyone’s making a fuss about what happened in the last three months, but when you actually read this correction in the context of the rally over the past 15 to 18 months, it’s honestly a big deal. It’s not something I did. I think there was a little bit of craziness on the screen in August and September last year with midcaps, smallcaps, small caps, story-based stocks, story-based stocks, all of that was happening and this I believe it’s a very healthy adjustment. I think there is irrational pessimism at the moment within a larger bull market. I understand that if you look at a screen and move like you did yesterday, you might feel confused or scared. But if you are into quality stocks, keep in mind that this market still has a lot of potential and is just an Indian market that has just gone off the rails.
Looking at the world market, the US is doing well, Asia is doing well, and the European market is also doing well. So there are localized issues like what happened to the rupee, what happened to the dollar index, what happened to crude oil, FII selling, a little bit of a slowdown in earnings.
So over the last two months, two-and-a-half months, all these factors are factored in. But with the index at 23,000, whether it’s a 2-3% difference or not, I think this market has once again reached a point where a long investment is justified based on risk and reward considerations. So when we analyze six months from now, January 2025, in hindsight, can we say that is the biggest buying opportunity of this bull market?
Gautam Shah: I think so, but you would be surprised to know that we have been tracking data for the past 25 years, going back to 2000. January is a difficult time and is known for market highs. If you remember, that was in 2008, 2000, and many other years, we had historic market ceilings and market corrections in January. Given everything that has happened in the last two years, the GDP numbers were terrible, people were worried about the economic slowdown, the Trump factor, the role of RBI, the budget forecast, etc., so this time was in some ways expected. But I believe so. This is a great buying opportunity.
Because as a technical analyst, reading weekly and monthly charts leads you to believe that this is a correction within a massive bull market, and that’s the only answer you need to answer. That’s it. If you’re looking at two weeks and two months, this market is going to be very difficult. But if you’re looking at six months, 12 months, 18 months, I think the risk and reward is justified.
So, what is the range of Nifty? The index level alone has already fallen by about 12%. How much calmer can you get from this level? And what are the possible benefits?
Gautam Shah: Well, if you look at the index level, as you rightly said, it drops to about 12%. However, there is such a disconnect between the index and the overall market as the average decline across the NSE is around 26%.
So, in some ways, we’ve already seen a really big bear market in the last four months, and as you may have noticed, it’s only the blue-chip stocks that have come under pressure in the last three weeks. , in a way, I really stopped revising. If you look at the mid-cap and small-cap indexes, they haven’t done anything compared to the gains we’ve seen over the past 15 to 18 months.
But getting back to your point, it’s even more of a weakness. Let’s consider two scenarios. A more optimistic scenario is that the market bottoms out somewhere in this 22,800, 23,000 area, which I think is very important based on multiple studies, but broad research suggests it’s oversold. , sentiment is oversold and it can’t get any worse in terms of sentiment.
Therefore, in an optimistic scenario, we would bottom out somewhere between 22,800 and 23,000. Although the pessimistic scenario is that if the budget doesn’t work out, if FII sell-off continues, if performance doesn’t work out or if HDFC Bank doesn’t come up with a positive surprise, then it dips into the 21,800, 22,000 zone. , I think this is really the worst. The case I’m considering. But look at the bigger picture.
So even from current levels, the downside chance is around 4%. But if everything goes back on track, I am confident that Nifty could reach 26,000 and even 28,400 in the next 18 months. So, 4% downside risk, 20% upside potential, that’s the risk reward that investors have at this point.
