After the recent correction in the market, everyone has following questions in their mind:

–Where is the bottom of market? 

-Will market correct more?

-Should we exit our investments?

–Is this the time for fresh Investment or should we wait?

 

EquityPandit would answer all your queries in this article, so that you can take a better and informed decision. Read this article till end.

Those who are not interested in the analysis can directly read the conclusion in the end of this article, though not recommended.

 

At present, the stock market has seen worst fall since year 2008. Central banks across the world are cutting interest rates drastically and due to corona effect, every economy is slowing down.

 

Now let’s look at present market scenario:

Nifty has corrected from high of almost 12400 to 10300 levels. Indian economy which is already struggling from its internal economy problem and on the top of it, global market and corona virus has made a solid set back to the economy. Depreciating Crude Oil price is positive news for Indian market which would help in maintaining fiscal deficit.

Global market has mainly been corrected due to corona virus effect as entire world economy is feared to slip into the recession mode. Second reason is the drastic fall in crude prices. Due to tussle between Russia and OPEC countries there is no production cut, which is further causing the crash in crude oil prices.

So overall for India, the problem is Corona virus fears and global market crackdown due to lower oil prices.

 

Now let’s look at the outlook of Index and Index heavy weights:

 

Nifty outlook

Now in this monthly chart we have plotted two Fibonacci retracement levels. One from year 2008 low to year 2020 high and other from the year 2016 low to year 2020 high. As we can see on chart, from these two different Fibonacci retracements, following levels come out:  11107, 10290, 10028, 8967…

 

Now how these levels would work?

Just see below daily chart of Nifty were it tried to take support at first retracement level of 11107 for few days and saw a breakdown from that level with big gap down opening after consolidating for five trading session. Once that level breached, it immediately saw downfall to the second retracement level of 10290. Lows of March 09, 2020 was 10294, exactly near the second retracement level and it bounced from this level to almost 10450 levels.

 

So now, if global market sentiment doesn’t improve then Monday low of 10294 is not safe. Below these levels, Nifty would test 10028 levels which is multiple months support for Nifty and coincidentally, Nifty has started its entire rally from this level only. Actual issue would be seen once this level of 10028 is been breached on the closing level. If that happens then market can see a downfall to level of 8967-9200 levels for Nifty which is the next Fibonacci retracement level. Coincidentally, this level was year 2015 highs (Nifty Level: 9119) which Nifty has breached in year 2017 after two years of consolidation. This is the level which we firmly believe would be a solid bottom under worst conditions.

 

BankNifty Outlook

 

 

As seen in BankNifty monthly chart we have plotted same retracement levels as that of Nifty and the levels are: 28080, 25698, 25276, 21421, 20743. As of now, BankNifty has made low of 25923 and bounced from that level. Now the Monday’s lows in BankNifty is equally important as that of Nifty. Just look at the below weekly chart of BankNifty, it has formed the channel and on Monday it exactly touched that lower end of channel, from where it bounced almost 600.

 

 

So we firmly believe that if Monday low of 25923 get breached on closing basis then it will surely touched next retracement level of 25698 and 25276. At the same time, Nifty would also see levels of 10028. And once the market breaches the levels of 25276 for BankNifty and 10028 for Nifty, we would see huge correction till 8990-9200 level in Nifty and 21000-21423 for BankNifty, which would be the final bottom, if it comes. However, it must be noted that this situation would come only if Nifty closes below 10028 and we believe that Nifty will surely hold this level unless corona effect won’t come under control.

 

Now let’s look at US Dow Jones to understand global markets:

 

US Dow Jones

 

 

Above is the monthly chart of US Dow Jones Index and similar to Nifty, we have plotted Fibonacci retracement levels from the year 2009 low and other one is from the year 2016 lows. Levels are: 26236, 24175, 24117, 20843, 20744. Like Nifty, US Dow Jones is also trying to protect its important monthly level of 24117. And again, if Dow fails to protect this level, next level would be 20843 which is further 10-12% correction in the market. So after looking at Nifty and Dow, we can say that market would surely try to make bottom around Monday’s intraday lows and if it fails to hold these levels then we should be ready for more panic in market.

Now let us look at chart of few Index Heavy weights:

 

1. Reliance Industries Limited:

 

Monthly retracement levels are: 1088,933,763 and Monday low is 1095. So again in line with Nifty, Reliance have also protected its Fibonacci level of 1088. But the negative news is that Reliance has broken a very important weekly channel as per the below given chart.

 

 

As per above chart Reliance has broken its important weekly channel so it is likely to witness further pressure and if Fibonacci level of 1088 is breached then we would see level around 1000.

 

2. HDFC Bank:

Now let’s see Fibonacci level on monthly charts.

 

First level comes at 1016 and Monday’s low is 1065 and hence stock still has some room for correction. This is important to note that Monday low is also very critical for the stock. Look at the below given. When we made one trendline from previous high and low it has formed a level of 1067 and today, it has bounced exactly from this level saving this trendline.

 

So here also closing below Monday low of 1065 would get this stock to first Fibonacci level of 1016.

 

3. HDFC Ltd

Monthly Fibo levels are: 1963 and1630. Monday low is 1981.2. Technically, the stock should take support at 1963 which is also a multiple trend line support and below that it could further correct another 10%.

4. ICICI Bank

ICICI bank has just saved its lower trendline of the channel on daily chart. This channel is running since year 2018. So this would be considered as strong support for ICICI bank.

 

5. Infosys:

First retracement level is 656 which is still far from the CMP:704. However on daily chart, it has just close on trend line support of 703-705 so again below today’s low, Infy can touch the levels of 656.

6. Kotak Bank:

First retracement level is 1565 and stock just closed above that level (CMP:1578) Second retracement levels is 1458.

Also on daily chart it has just saved important trend line support level of 1542. So again today’s low is very critical.

7. TCS:

Retracement levels are: 1996 and 1811. TCS broke the first retracement level on Monday and closed at 1972. Daily chart is also bearish so further downside would be seen in this stock.

Conclusion:

 

So, coming back to our questions:

–Where is the bottom of market? 

-Will market correct more?

-Should we exit our investments?

–Is this the time for fresh Investment or should we wait?

 

So after analysing the charts and levels of Nifty, BankNifty, Dow Jones and other heavy weights in India, we know that Nifty along with all its major stocks have saved important support levels on Monday and Nifty can surely try to make bottoms at 10290 or 10028 levels. Closing below these levels would create big panic in market for sure.

 

So what strategy should traders or Investors adopt?

 

1. Investors, who are long from level of 12000 or above, cannot do anything at present level as it is too late to exit. However, following actions could be taken:

For Midcaps and Small Cap stocks: it’s already late to exit. However, it would be advisable that one should exit from midcap or small cap stocks, if Nifty closes below level of 10028. Once the levels of 10028 breaches on the closing basis then it would be a panic situation for the market and low quality stocks would be hammered very badly.

For Bluechip Stocks: If investors can hold for long term then one can average/add some blue-chip stocks at different Fibonacci levels as mentioned in the above Nifty chart analysis.

 

2. Investors who want to deploy fresh money can invest 50% now and rest 50% at 10028 and 9200 levels for Nifty (If 9200 is seen, which is looking hard at present). We firmly believe that Nifty has good chance of making bottom at current levels. As of now, it is unlikely that it will go and close below 10028 level for Nifty, unless global markets further plunge and the Coronavirus situation gets worse.

 

3. Investors who invest in Mutual Fund can continue to invest via SIP as mutual fund is 10-15 year product. However one should ensure that they have diversified properly.

 

4. Short term investors should buy in small-small quantities in a cyclic manner with proper trailing stoploss as for short term, market would remain very volatile.