I am not an economist, I am not a chartist, I am not a strategist and I am not a fundamental analyst. I go by common sense and gut feeling.
As many of you would recall, on Tuesday morning I made a simple call – buy the gap down and you won’t need to trade for a long, long time. In fact if you go to my Twitter timeline, that’s also my pinned tweet.
So let’s try to explain this stunning rally which has surprised many but not me. Basically, it all boils down to market positioning. The market had a huge rally in November and Nifty closed the series at 10,856. It added some more over next two days and topped out at 10,941.
After that, the market saw a big decline and by the time the exit poll results were out, the Nifty was down to 10,500. Then, a day before the actual assembly poll outcome, news came of Urjit Patel stepping down and the SGX Nifty fell 150 points (on top of the 200 points fall we had already seen)
This was enough for me to sense culmination of the fall and a hard bottom. What is a hard bottom? When the market reverses sharply after a huge gap-down on all round bad news. And that’s what we had on Tuesday. The BJP losing 3-0, the so called messing around with institutions like RBI and commentators calling for doomsday.
My mind immediately went back to what happened during Rexit. And while history is not always repeated, in stock markets, somehow it does. Why is that? Simply because, the greed and fear remain the same. And if there is one golden rule in financial market, it is to buy the fear and sell the greed.
Now the next obvious question you will ask me is what next? Well for starters, the market may surprise naysayers and make a huge move before many will participate. This market has returned from the point of fear. It may now not stop before greed sets in.
And I know people want to point to the FII data and say that this is a false rally, driven by LIC money etc. Well, my answer to that is in two parts: 1) Do you care who is buying as long as you are making money? and 2) We had the mother of all bull markets in 2017 purely on domestic money, so why should that be an issue at all?
Of course in the very near term, there may be corrections but the market has now given you a sacrosanct bottom. The Tuesday low of 10,300 odd on the Nifty should be a bottom for the foreseeable future.
Anuj Singhal is the stocks market editor at CNBC-TV18.
First Published: IST