I'm Investing now as 20% Market Fall looks Impossible - Rahul Jain Analysis #marketcrash #portfolio

Summary

In this video, the analyst provides an in-depth evaluation of Nifty's performance, focusing on recent market trends, key corrections, and the influence of foreign institutional (FI) selling. Using historical data, the analysis shows how Nifty tends to find support at a PE ratio of 20 during significant corrections, with past examples highlighting similar trends. The current market situation is under pressure, with FI selling continuing and global bond yields high. However, the Indian government's capital expenditure could boost market sentiment in the second half of the fiscal year. The video also suggests strategies for stock selection based on historical support levels and valuation trends.

Takeaways

• 😀 Nifty has been in a downtrend, falling continuously from 7th November to 14th November 2024, and is currently trading below key moving averages like the 20-day, 50-day, and 100-day averages.
• 📉 As of 14th November 2024, Nifty touched the 200-day simple moving average, sparking concerns about the continuation of this decline and the potential for further drops.
• 💼 Nifty has already fallen by more than 10%, and experts predict it could drop another 10% by the end of 2024.
• 📊 A historical analysis of market corrections shows that during major corrections, such as between December 2022 and March 2023, the market saw a recovery once the Nifty PE ratio dropped to 20.
• 🔍 In past corrections, a Nifty PE ratio of 20 has acted as a support level, marking the bottom of market corrections, after which the market often rebounded.
• 💡 The market correction in October 2021 to June 2022 also saw significant FI selling, with a subsequent recovery once the Nifty PE ratio fell to around 20.
• 📉 Currently, FI selling continues to exert downward pressure on the market, especially in November 2024, where FIIs have been continuously selling in Indian markets.
• 📈 The Nifty PE ratio as of late November 2024 has dropped to 20, signaling that the market may be nearing a support level, similar to previous corrections.
• 🧮 If the Nifty PE ratio continues to fall, the target value of Nifty based on a PE ratio of 20 would be around 21,720, which could act as a potential bottom.
• 💼 Despite the bearish sentiment in the stock market, key macroeconomic factors, like government capital expenditure and potential economic recovery, may help lift market sentiment in the future.
• 💭 The US 10-year treasury bond yield is currently high, which may deter FIs from returning to Indian markets in the near term, adding to market uncertainty.
• 💰 The Indian government’s capital expenditure is expected to rise in the second half of 2024, potentially boosting market sentiment and supporting a market recovery if targets are met.

Q & A

What is the current market trend according to the script?

The market is in a downtrend, with Nifty falling continuously for six trading sessions from November 7th to November 14th. During this period, Nifty has been trading below its 20-day, 50-day, and 100-day moving averages.

What factors are causing the recent fall in Nifty?

The main reason for the recent fall is heavy selling by Foreign Institutional Investors (FIs). Additionally, the US 10-year treasury bond yield is at a high, which may be influencing FIs to move their investments elsewhere, adding pressure to the Indian market.

How much has Nifty fallen from November 7th to November 14th?

As of November 14th, Nifty has fallen by more than 10%.

What does the script suggest about the possibility of further Nifty decline?

Experts are predicting that Nifty could fall another 10% by the end of the year, although the script emphasizes the importance of analyzing past market corrections to better understand the potential for further declines.

What was the Nifty PE ratio at the time of the previous major correction (Dec 2022 - Mar 2023)?

During the correction from December 2022 to March 2023, the Nifty PE ratio was at 22-24 at the start, and when Nifty hit the bottom, it had dropped to a PE ratio of 20.

What pattern does the script observe in past corrections regarding the Nifty PE ratio?

The script highlights that in past corrections, whenever the Nifty PE ratio dropped to around 20, the market found support and began to reverse, suggesting that a PE ratio of 20 acts as a crucial support level.

What is the significance of the Nifty PE ratio in understanding market corrections?

The Nifty PE ratio provides insight into market valuations. Historically, when the PE ratio drops to around 20 during a correction, it signals that the market has become more attractive for investors, often leading to a recovery or reversal in the market.

What is the expected Nifty value if the PE ratio drops to 20 with the current EPS?

If the Nifty PE ratio drops to 20 and the current EPS of Nifty is 1086, the expected Nifty value would be 21,720 (20 * 1086). This level is considered a significant support level for the market.

What are the key macroeconomic factors influencing the current market situation?

Key factors include the high US 10-year treasury bond yield, which may be diverting investments away from Indian markets, and the capital expenditure plans by the Indian government, which could play a role in the market's recovery if the government accelerates spending in the second half of the fiscal year.

How does the script recommend dealing with the current market uncertainty?

The script advises analyzing individual stocks carefully, looking at support levels, management quality, earnings growth, and other fundamentals. It emphasizes accumulating stocks at key price levels, particularly those that have shown strong support during previous market downturns, to improve risk-reward ratios.