Last updated 11th Nov 2018:
In this post: ‘The Stock Market Crash of 2018’, I’ve recorded the 2018 market crash/correction and captured weekly Sensex movement till recovery, week on week. The main intention for doing this is to get a comprehensive view on how the markets behave, what are the macros at the time and which industries behaved how. I’ve captured my and investment decisions during that period.
How was the Macro situation playing at the time:
- Rupee has fallen to historic lows(1$=₹73.77, 5th Oct), and continues
- Oil prices are historic high in India
- There have been major issues from past few months in the Indian financial sectors:
- Most of PSU Banks have higher NPAs
- Punjab National Bank scam
- RBI rejects Yes Bank CEO Rana Kapur’s reappointment
- IL&FS debt issue
- Trade war between US and China is going on.
- Trump has commented that he’d revise the rates with India.
- On 30th Oct, India and Japan signed a multi-year currency swap agreement, which will ease both countries to be less dependent on US dollar for their trades.
- Nov 9th, the markets were volatile this week (5th to 9th Nov) with resistance to downward movement, and ended positive with respect to week’s opening price. This week seems to be start of trend reversal.
Though some of the above had already occurred, Indian stock markets were behaving awkwardly till it peaked in Aug 2018. Sensex and Nifty50 were gaining(thanks to few large caps in the index), while Mid-Cap, Small-Cap and Micro-Caps were collapsing. This was sufficient to suspect a major correction in near future.
24th Sep 2018:
Sensex lost 1.46%(536 points), Nifty50 lost 1.58%(175 points), Nifty Smallcap 100 lost 2.60%(179 points) and Nifty Midcap 100 lost 2.72%(499 points).
6th Oct 2018:
The carnage continued …
Sensex & Nifty further dropped during the last week.
Look at the below Sensex five day chart:
Clear sign of panic selling.
This week, 8th to 12th Oct, markets were trying really hard to pull up, but every time it seemed pulling up, there were sudden drops to pull it back towards lower value. The below image shows the same:
Markets 15th October to 19th October:
The down trend continued. There was positive movements from 15th & 16th, but on 17th to 19th it went negative(18th was holiday). Below image shows the week’s movement. 1$ was equal to ₹73.32 on 19th Oct.
Oct 23 to Oct 29
In this week market kind of bounced back. On 26th Oct Sensex had bottomed, and most of the damage was done.
Sensex had crashed 17% in about 3 months, between 29th Aug(Sense: 38989) to 26th Oct 2018.(Sensex: 33291).
Oct 29 to 2nd Nov:
Sensex moved up from 33411 to 35011, about 4.5%, in this week. This looks like trend reversal. Main event that took place in this week was; Indian and Japan signed $17-billion currency Swap multi-year agreement. This would help curtail Rupee depreciation against dollar.
Nov 5 to Nov 9:
Markets continued its upwards trend from last week and ended positive. This affirms last week’s trend reversal.
Advice for the long term investors:
As there were good amount of corrections in many good companies, below is my current strategy:
(1) DON’T FOLLOW THE CROWD, don’t panic sell your holdings. Just stay invested.
(2)This is for sure one of the greatest opportunity in India Market to buy your favourite, quality stock and make handsome profit over long term.
(3) Monitor your favorite stock for its price movement, and start accumulating in dips.
(4) Most important: Be patient, it may take weeks, months or even years for market to stabilize and recover.
(5) Though I’m not recommending this; I’m Just emphasising on the opportunity: These may be considered the times when someone need not know much of fundamental analysis or company valuation, and still make money by investing in popular, old, large cap companies, by following the above mentioned strategy and staying invested longer.
To be continued…
image credit: www.moneycontrol.com