Will the market find its bottom in the near term or continue to slide further Niftys historical chart can give some perspective.Niftys daily chart shows two tops in 2018 first on January 29, when the 50-share index had closed at 11,130, and the second on August 28, when it settled at 11,738.
At the very start of 2018, the market witnessed a serious correction for 38 days and reversed thereafter.
This time too, the market has already corrected for 38 days and at least a short-term reversal is on the cards.On October 27, Nifty somehow managed to hold the 10,000 level.
I think we are very near to the short-term bottom, says Jay Anand Thakkar, CMT - Assistant Vice-President - Equity Research, Anand Rathi Shares and Stock Brokers.Amid this fall that we have seen in the past two months, we are somewhere completing the initial leg of the downtrend.
This is just the first leg down from where the momentum indicators have reversed from an overbought territory to an oversold territory and that generally happens when the overall trend reverses.
I think the risk-reward is definitely good on the long side, Thakkar said in an interaction with ETNow.
So, where is the bottomThe recent correction came after sustained withdrawal by foreign institutional investors from the market amid debt default by one of the leading NBFCs.
However, the correction earlier this year came mainly due to reclassification of mutual funds in the midcap and smallcap segments.
Rising crude oil prices and a falling rupee have been impacting sentiment on Dalal Street since the beginning of the year.
The Nifty50 settled the previous year with a gain of 28 per cent.
Macroeconomic conditions are not favouring a bottom, as US sanctions on Iran might lead to supply disruptions, which may cause a potential flareup in oil prices.
US President Donald Trump last week said all American sanctions against Iran will be in full force on November 5.Overall, the markets are pretty much oversold, but sentiment is spoilt and the big risk now is that if the market breaks through the 10,000 level and the next key support is tested, you could see heavy selling coming in again.
There is no catalyst as such.
Smart money might be bottom-fishing, but we do not know where the bottom is.
Right now things are not looking too good, market expert Ajay Bagga said in an interaction with ETNow.The latest correction since the end of August looked more severe, as the benchmark indices lost more than 2 per cent on three occasions in October, whereas it dipped over 2 per cent only once during the previous correction earlier this year (Jan 29 and March 23).
In 2017, Niftys maximum fall on any given day was 1.56 per cent on September 22, 2017.After hitting a low of 9,998 on March 23, Nifty recovered 17 per cent till August 28.
However, from there on, the index has corrected around 15 per cent till date.How have the sectors behavedSelling was severe in sectors like metals, realty, banking, capital goods and healthcare, when market plunged from the top hit on January 29.
It lasted till March 23.
Before hitting the second top this year, major recovery was seen in sectors like IT, FMCG, Bankex, Healthcare and TECK indices between March 23 and August 28.
Power and realty stocks continued to bleed.The ongoing selling has hit almost all sectors with the BSE Realty index falling 24 per cent between August 28 and October 26.
Others, including BSE Auto, Consumer Durables, Bankex, Oil Gas, FMCG, Capital Goods, Teck and Healthcare indices have dipped between 10 per cent and 23 per cent in this period.
Stocks from the NBFC sector plunged up to 73 per cent.
Sweet spotsAt present, the market is in consolidation mode due to various macro-economic headwinds, while the broader market (midcaps and smallcaps) have seen a deep correction this year.
Sampath Reddy, chief investment officer, Bajaj Allianz Life Insurance, said the valuation premium in the midcap and smallcap segments has come down significantly, and quite close to the largecaps now.We still prefer largecaps more from a risk-reward perspective.
The deep correction in midcap smallcap segments (particularly quality stocks) is starting to present some selective value, and long-term investors can consider partial allocation to this space at this juncture, he said.Kenneth Andrade, Founder, Old Bridge Capital Management, sees value emerge in manufacturing, infrastructure and utilities segments.