nifty50: Is this the end of bear market? Let’s do some data crunching

Greed and worry are the 2 strongest feelings which drive the market. The market gives the perfect alternatives when it swings to both of those two excessive feelings.

Nifty 50 is down by about 18% from its October 2021 excessive of 18,604. The mid-cap and small-cap indices have fallen greater than 20% and entered the bear market.

Now the query on everybody’s thoughts is that’s this the tip of the bear market or will we fall additional? To reply this query allow us to perceive how one can measure these two feelings of greed and worry with the assistance of numbers.

The autumn of Covid-19 is a traditional instance of worry gripping the market. When a inventory trades above its 200-day shifting common (DMA) it’s thought of to be in a long-term uptrend. When most shares are buying and selling above their 200 DMA it’s thought of a bull market.

In the course of the Covid lows, solely 10% of Nifty 50 shares had been buying and selling above their 200 DMA. This was the bottom degree recorded since 2015. There was an excessive degree of worry within the markets. And guess what… that’s the place the markets bottomed.

The state of affairs at this time is like what we noticed through the pandemic. On June 20, 2022, solely 14% of the Nifty 50 shares closed above their 200 DMA which has been the bottom within the final eight years excluding the Covid-fall.
Other than this, the PE of the Nifty 50 is now buying and selling at 19.07 which is under its median degree of 20.48. In the course of the Covid lows, Nifty’s PE had hit a low of 17.15. Nifty’s present PE is up solely 11% above its Covid lows. In the event you think about the present WPI inflation of 15% then Nifty is already buying and selling under Covid valuations.

Behavioral side can also be indicating an excessive aside from fundamentals and technicals. The sentiment out there is so pessimistic that google searches for the phrase “bear market” has recorded the second-highest readings after the Covid outbreak.

All of this means extreme worry and pessimism within the markets. Now, what must you do when there’s an excessive amount of worry? Warren Buffett would say to be grasping when everybody else is fearful.

Simply 2 months after the Covid fall, the index witnessed a staggering return of about 32%. A yr later the Nifty 50 index had virtually doubled. It was one of many quickest rallies in a yr in Indian markets.

From the place we stand at this time, one could be skeptical whereas investing. However the risk-to-reward ratio may be very engaging. The draw back threat appears restricted from right here. We may be nearer than we predict for yet one more GREED journey.

Market members can think about this as a shopping for alternative to build up sound shares with strong fundamentals, free money flows, and fewer leverage for an extended horizon whereas ignoring the short-term hiccups.

Technical Outlook

Nifty 50 index closed constructive after buying and selling in a uneven method for your entire week. It has fashioned a bullish harami candlestick sample on the weekly charts. Market sentiments are totally on the destructive facet as each bounce is getting offered into. Nonetheless, the Nifty is getting rejected at decrease ranges which additionally coincides with the falling channel assist.

Many main international indices are witnessing a bounce from falling assist on comparable traces. This hints at a risk of a short bounce-back rally. We recommend merchants keep a impartial to a light constructive bias so long as the Nifty doesn’t break under the fast assist of 15200. Quick resistance is now positioned at 15900.

Expectations for the week
Markets might be influenced by an eventful financial calendar within the coming week. To begin with, all eyes could be on US quarterly GDP progress price numbers. If US registers destructive progress then it is going to formally enter a recession which may dampen the market sentiment.

Again dwelling, the auto gross sales numbers will proceed to drive stock-specific actions on D-street as traders attempt to decode the longer term pattern.

Additional, whipsaw actions within the indices could also be witnessed because of the month-to-month F&O expiry within the second half of the week. Within the midst of volatility, investing in essentially resilient shares in a phased method could be a very good strategy. Nifty 50 closed the week at 15,699.25, up by 2.65%.