Nifty was trading near levels of 9000 around September 2016. Everything looked good back then and market participants were talking about how 2016 has been a great year for emerging market.
MSCI EEM (emerging markets ETF) is up more than 18 percent this year while large-cap U.S. stocks are up just 6 percent
— Deepak Singh (@smarket) October 11, 2016
There was one big uncertainty event before the market back then: US elections. People were worried about Trump rhetoric but also confident that Hillary would be able to secure a win and the Globe will be happy family.
The script did not go as per plan and two major events happened on Nov 08 2016:
1. Demonetization
2. Trump won elections
Both events were hugely disruptive in nature. Emerging market immediately sold off on fears of deglobalization.
MSCI EEM Emerging market ETF pic.twitter.com/pblJwpBWJI
— Deepak Singh (@smarket) November 10, 2016
It was a double whammy for Indian market because of demonetization news. The market was worried that it would disrupt business environment in a major way. When a market sells off, it’s never a great idea to be brave. It pays to follow and – let the market tell you what it wants to do. The first major hint market gave about its intent was when it found support at the June 24 lows/Brexit Lows on Nov 21 2016. Bulls really heaved a sigh of relief that all is not lost. A new level of 7900-7930 was there to watch with HOPE
Source: Chartalert.com
It’s easy to become super bearish or bullish based on what you hear, what you see on Television but the best guide is what market is trying to do. By early December 2016 – market started giving a clear sign that things are settling down and sooner than later – the market will resume its uptrend.
Demonetization is now a month old and Nifty is down 5% during this period and INR has depreciated by 2.3%. That does not sound like panic
— Deepak Singh (@smarket) December 7, 2016
It’s based on that – I wrote this article about possibility of Nifty finding bottom/support on Dec 14
Why Nifty will find support around 7930-7980 levels? https://t.co/F5FTci6ptE
— Deepak Singh (@smarket) December 14, 2016
The reason: 1. Mutual Fund Flows and 2. Stability in Global Emerging market
Finally – Nifty came down on Dec 26 to retest the Nov 21 lows and it was no brainer back then –
Nifty at very important support level nowhttps://t.co/NwPgvhdopM pic.twitter.com/PxRLImKIwv
— Deepak Singh (@smarket) December 25, 2016
Nifty finally took off and rallied like crazy in 2017. Here’s how Nifty looks as of today:
Source: Chartalert.com
Nobody knows what market will do but when the market offers an opportunity, it pays to take advantage and ride it for good amount of time.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers