A CAUTION-NOTE ON INDIAN INDICES NIFTY—50 & NIFTY BANK-26.9.2024.

 

A CAUTION-NOTE ON INDIAN INDICES NIFTY—50 & NIFTY BANK-26.9.2024.

Dear Friends,

The stock markets around the world are very buoyant for the last couple of years and particularly Indian stock market indices are performing great and hitting new all-time high every other day recently but the overall segment of market such as midcap, small cap, IT-index etc are not performing that great, therefore it gives a feeling that indices are being managed and looking at the indices buoyancy people are getting sucked in into the market even at higher levels because FOMO is driving them.

Although technically few indices such as Nifty-50 & Nifty Bank which drives overall sentiment of the Indian market looks very strong for the continuation of the up move ,but the vertical rise, volatility and to top it all extremely stretched valuation is a huge concern. Please note that it may continue it’s up journey in coming days, but I envisage that and it may not sustain at the higher levels in coming days and may get into severe correction and the on-going uptrend may halt for a while.

 I strongly feel that market is in a top out process and I have strong reason to support my thoughts. Please note that almost half of the constituent stock of both the indices are already weak or given weak signal on the chart and rest of the stock are on the verge of getting weak and this may process may take some time, therefore it may get into severe correction or it may top out for good for a while tentatively by last week of October-2024 or 1^st week of November-2024, or may take longer time or it may happen earlier also, but it is likely to happen for sure. Therefore please keep an eye on price action of both the indices because it will give first sign of weakness. The other reasons to support my thought of severe correction or topping out are mentioned hereunder; similarly the positive factors which are driving the indices now are also mentioned hereunder.

The possible top out range is 26118/26273/26995/27212/27381 or earlier. But if it moves above 27381 and sustain then it has to be reviewed again.

POSITIVES WHICH ARE DRIVING THE MARKET:-

1. Indian Mutual Funds have huge money at their disposal to be invested and they are getting more than 20000 crore + money through SIP every month.

2.The recent interest rate cut of 50 bps in U.S.A, so FII are driving the market to great extent.

Therefore right now liquidity is driving the market.

POSSIBLE TOP OUT REASONS:--

1. Valuation are extremely stretched in general, need to be corrected for fresh investments.

2. Irrational exuberance in the market, as negative net worth stocks are also zooming high and the greed & FOMO is driving the general people to get sucked in into the market. 

3. People are liquidating their Fixed Deposit Receipt and investing the market and that too most of the time without proper knowledge.

4. Deluge of IPO’S hitting the market –most prominent sign of topping out.

5. Our market is celebrating the interest rate cut in U.S.A now, but it is indicative of that the recession may set in U.S.A in few months time and its effect will trickle down to the rest of the world. The U.S.A housing market has either peaked out or in the process of peaking out could be a major trigger for economic recession.

6. Indian market severely corrected or tanked after some time when U.S.A start cutting interest rates, one can check the Indian stock market history in this context.

7. Vertical rise & extreme volatility is not good for the market.

8. Liquidity is driving the market now and not the fundamentals & financials but eventually it will hold the prices because liquidity is a dicey proposition. 

 9. People think that making money in the stock market is very easy, but this has not been the case ever.

10. Automobile sale slowing down is a weak sign because it is a key indicator of economic growth.

11. Last but not the least market has been moving in a eight years cycle since 1992 and it  faced  either severe correction  or crash like situation every eighth year, except for 2020 which was unprecedented and happened because of Covid—Pandemic.

1992—Harshad Mehta Crash, 2000—Dotcom crash, 2008—U.S.A Financial crisis, 2016—Yuan devaluation, Brexit and demonetization, 2020—Covid Pandemic, 2024—Crash possible or in early 2025.

REMARKS: --- In view of the above observation ,it is suggested that it is a high time that one should review their portfolio and bring in home some profit in a staggered manner and stay in cash at least by 40—45% or more and wait for the opportune time to invest again.

Disclaimer:-The view expressed here are solely of the author and he is not at all responsible in any way for the outcome of the trade you enter based on the above view.

Kindly note that make your cost your stop loss in favorable trade and then trail it as the price move up/down to gain maximum profit and avoid losses. Use support and resistance levels as entry, exit, target and trailing stop loss points. DO NOT TRADE WITHOUT STOP LOSS. 

Note: Price stated here are of spot market. 

Thanks 

Narendra Kumar Surana

Mobile—8240951127/9831313654.

Email--- suranank@gmail.com