In this post(Last updated: 29th Nov 2018) ‘The Stock Market Crash of 2018’, I’ve recorded the weekly Sensex movement till sign of recovery. I have also capture some of the macro events during that time.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 investment advice during that period.
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
- BJP is accused of foul play in Rafale deal, by making the project awarded to Reliance
- 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.
On 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).
don’t make any investments until markets stabilise.
On 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. don’t make any investments until markets stabilise.
On Oct 14:
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:
don’t make any investments, as markets haven’t stabilised yet.
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.
don’t make any investments until markets stabilise.
From Oct 23 to Oct 29:
Ray of hope ?
In this week market kind of bounced back. On 26th Oct Sensex seemed to have hit its bottomed.
don’t make any investments yet, as markets have to show positive trend for at least another week.
From 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.
From Nov 5 to Nov 9:
Markets continued its upwards trend from last week and ended positive. This affirms trend reversal. You may carefully start investing long term in attractive companies, post research.
Crude price have been falling, and that is the reason for the uptrend from last two weeks.
From Nov 12 to Nov 16:
In this week MP Ananthkumar of BJP passed away, this impacted the upward trajectory it Sensex, with a price drop on 13th.
However trend caught up during the rest of the week and ended higher than the week’s opening price.
From Nov 15 to Nov 23
The Sensex fell this week, reason for the drop isn’t very clear. It seems like Sensex would be range bound around this week’s low for some time, or might drop further down before recovering. I’d recommend not to make any fresh investments at present.
Sensex had crashed 17% in about 3 months, between 29th Aug(Sense: 38989) to 26th Oct 2018.(Sensex: 33291).
Now, Sensex, has shown signs of reversal from 5th Nov onwards.
Advice for the long term investors:
As there were good amount of corrections in many good companies, below was my strategy during the stock market crash of 2018, which holds good during any corrections in future as well:
(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 emphasizing 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.
Hope you like the analysis of ‘The Stock Market Crash of 2018’. Be cautious, and make your investments only when the price drops to a level which is comfortable for you to invest with long term horizon in mind. You may want to have a look at our model portfolio
image credit: www.moneycontrol.com