Market Meltdown: Did the Bull Party Just End?

Dalal Street Takes a Breather: Winners Take Stock After Record Streak

Boom: After scaling fresh peaks, the Indian stock market took a sharp turn south on Wednesday. Sensex plunged over 900 points, Nifty tumbled 303 points, and all sectoral indices ended in the red.

Across the Board: Every corner of the market felt the pain. Auto, media, metal, PSU banks, and realty stocks were hit particularly hard. Adani twins (Ports and Enterprises) shed 6% each, Tata Steel weakened by 5%, and even blue chips like SBI and Tata Motors weren’t spared.

Profit Party: The rally had been relentless for seven straight weeks, and traders finally decided to cash in. “Overbought zone” and “hiccups” became the words of the day.

Midcaps & Smallcaps: The smaller players felt the tremors even more, with Nifty Midcap and Nifty Smallcap indices tumbling over 3% each. Nifty PSU Bank turned out to be the biggest loser, declining a whopping 4%.

But Wait… Not all signs point to doom and gloom. Global cues were positive, with Nikkei and FTSE indices in the green. Bond yields fell, and crude oil remained below $80. Plus, December historically witnesses corrections after strong November performances.

So, what now? Experts say it’s too early to call the rally over. Nifty needs to break below 20,700 for a confirmed trend reversal. December might see some consolidation, but the long-term outlook remains positive.

In a nutshell, it was a day of profit-taking after a heady run. But remember, Dalal Street is a seasoned roller coaster, and this dip might just be another exciting twist in the ride.

Has Dalal Street gone a bit dizzy from the climb? While the record highs might tempt you to grab on tight, whispers of a slowdown are starting to swirl. December, historically, isn’t a stranger to corrections, and with holiday season dampening FII flow, a dip could be on the cards.

But worry not, bulls! The long-term story remains compelling. Compared to its regional peers, India’s growth potential still shines bright. Even the “Buffett Indicator”, a measure of market valuation, hints at potential overvaluation in some corners, not the entire landscape.

The real concern lies in the “micro-mania” gripping the small-cap space. Experts warn of frothy valuations and a brewing bubble, evidenced by fund managers putting breaks on investments. It’s like a party where the punch bowl is running low, and some guests are getting a little too boisterous.

So, what does this mean for you? Large-caps, with their calmer price tags, might be the safer dance partners while the smaller ones find their rhythm. Remember, chasing quick thrills can leave you with a hangover. Approach with caution, keep an eye on the exit, and remember: the longer game is often the wiser one.


Key Aspects:

👉High Volatility Expected: Weekly expiry coupled with potential trend continuation or reversal creates a volatile environment.

👉Volume Profile and SuperTrend: POC (Point of Control) at 20,940 and SuperTrend at 20,900 offer key support levels.

👉Unfilled Gap: Range at 21,075-20,950 remains unfilled, potentially influencing market behavior.

Trading Strategies:

👉Gap Up (10% probability): Consider shorting with a stop loss above 21,300 Nifty Spot.

👉Gap Down (90% probability): Expect selling pressure from the start. Look for potential shorting opportunities.

👉First Hour Volatility: Market may spike or dip initially before stabilizing. Avoid hasty decisions.

👉Potential Bounce Back: Weekly expiry might induce a temporary bounce back from the initial low, but sustainability is uncertain.

👉Trading Buy Opportunity: Consider buying Nifty Futures if Nifty Spot dips below 20,900-20,920.

Remember: These are potential scenarios based on technical analysis and may not occur as predicted.Always conduct your own research and consider risk management strategies before making trading decisions.

The Author

Vaid IQ

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