Sunday Thoughts
Every few weeks I tend to write a post on Sunday which is a mix of Technicals, Market Reading, Fundamentals and all other Thoughts.
One of the major reasons why every few weeks Sunday is a good day to think and do Analysis is that – Markets are Shut and you had a Trading Day Break on Saturday.
The Mind is more Calmer and less biased.
Below is a thread I wrote this Sunday on Twitter
#Thread Every time there is a deep correction there will be multiple #anchors in terms of Stock/Index price.
#Anchoring to 2020 highs ( pre covid ), 2018 highs or 2020 lows, or 2021 highs? A bad anchor can lead to Analysis-paralysis or Panic or Temptation! All hurt.
- Nifty is 30% higher than the 2020 highs ( Nothing gr8 for a 2-year return)
- Nifty is 45-47% higher than Jan 2018 highs. ( Barely close to Fixed Income returns of 6-8% cagr)
- Nifty is 115% higher than Mar 2020 lows. ( 1-3 mth window Super Returns. Paralyzed in new buying)
- Nifty down 13% from 2021 highs. Smallcap Midcap Indices down 15-20% ( Just another correction or time to Panic ?)
The Worst anchor is to look at stocks because they are down 40-70% down. Worst mistakes here. Read this article - We are Cheapos !!
#Anchoring to 2020 lows paralyzed many from looking at opportunities all through 2020-2021.
The Fall of 2020 led people to panic too late. Interestingly #Markets bottomed on the day of the lockdown. Same way #doomsday will continue. So look at 2018/2020 highs too.
Before I mention some indices and anchors posting 3 older articles that should help in decision making towards what to anchor on June 2021 - 64% of Stocks Below Jan 2018 highs. There are a lot of Opportunities even in Current Markets.
Excerpt from June 21 post
How does it look in June 2021.
The universe of 1419 stocks only NSE Listed stocks above 5 rs as on 15th Jan 2018.
1) % of Stocks Below 2018 Highs
- 64% of the stocks are still below 2018 highs.
- 48% of the stocks are still 25% or more below the 2018 highs.
- 28% of the stocks are still 50% below 2018 highs.
November 2020 - Nifty up But Stocks are Down !!. Time for Stocks to Catch Up in coming years.
Excerpt from November 2020 post
1) The Fall From peak of 2018 to November 2020
The Nifty is up but stocks are down !! – Everyone looks at the Nifty but everything apart from that is down and even a lot of stocks in Nifty are down below the 2018 prices
- Nifty is up 19%
- 15% stocks only are trading above its Jan 2018 prices (218 out of 1461 stocks)
- 85% stocks are trading below its Jan 2018 prices (1243 out of 1461 stocks)
- 74% stocks are down more than 25% from the Jan 2018 prices.
- 55% stocks are down more than 50% from the Jan 2018 prices.
Back in March 2020 you had the option to read doomsday or just stay put or buy. Read March 24 2020 post - Equity–Never been so Bad so Quick. What Next ?
So if one removes the top 15 stocks and looks at all the parameters of pain it is already 2008 !!
( 87% of stocks down 50% in 2008 is now 79% of stocks down 50% )
The 2020 move did some things very differently. No euphoric move in end of 2020 like in 2007. The fall has seen no relief rallies of any sort. If this is the case the historical expectation of a sideways consolidation and a retest may not happen. So the recovery can even be very ferocious.
Shorts need to be extremely careful. This is not the time to panic and sell. It will take a lot of guts to buy equities today. But this is the time when multi-fold returns happen over next few years , if we survive the covid-19
1) Nifty Smallcap 100 up 40% from 2020 highs. Still lower than or close to 2018 highs ( #Whattay 0 % returns in 4 + years) . Almost 2.5-3x from March 2020 lows.
2) BSE Smallcap 70-75% from 2020 highs. 30% higher than 2018 highs ( #Bad ). Up almost 3x from 2020 lows.
3) Nifty IT is 70-75% higher than pre-2020 highs ( #Midcap and #Smallcap IT much much more ) . Down 26% from 2021 highs. 250-280% from lows of 2020. ( #Wow) . Should you get excited on falls is a big question mark - Should be careful.
4) Nifty Pharma 45-50% higher to 2020 but still lower than 2015 highs. ( A re-rating big cycle play can take a long time to come back after a crash. This is what indicates one to be careful in IT )
5) Nifty Auto 35% higher to 2020 highs. Still below 2018 highs.
6) Nifty Private Bank is still lower than highs of 2019/2020.
7) Bank Nifty is just 6% higher compared to pre 2020 highs. Down 17% from all-time highs
One would be better off looking at stocks/indices with respect to pre-covid Jan-Feb 2020 highs and 2018 highs. The first instinct would be to anchor to lows of March 2020 or highs of 2021-2022. Avoid Analysis-Paralysis or Panic. A lot of opportunities right now n more coming!
A lot of good investment opportunities and today and some more coming to you in coming weeks/months if you can keep calm and think rationally.
Do follow me on Twitter and Instagram for more such updates
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