Current dip at the NSE offers a good buying opportunity for investors keen on the future.
It’s clocking close to four months and 10 days of funk. That’s how long equity markets have been “dancing with the bear”. Investors continue to feel the chill as the mood remains decidedly bearish.
There’s an expectation for further bouts of volatility —still attacking the market with vengeance — from now till December giving good reason to keep watching the bourse nervously.
There’s been no shortage of reasons to be fearful. By the close of last month, the NSE 20 Index was still below its 200-day moving average and far below recent highs seen in August 2017 (3,787 points).
It’s a serious correction — fall greater than 20 per cent from the start of the year. But is it all gloom and doom for now or should we expect a ‘Tiger Woods-esque’ bounce back at this stage? No easy perspective, but let’s consider the two main camps.
For bears, current market slump has been an expected reaction to economic concerns on offer — from expected ramifications of the Finance Bill to government fiscal challenges —still dominating the headlines, to loss of the International Monetary Fund facility, tighter fiscal frameworks, slowed foreign purchases and the capital strike as a result of the rate cap.
Recent weak earnings growth has also exacerbated fear. So it’s only natural what the market is doing.
On the other hand, diehard bulls hold a different view. They believe the sell-off has been driven more by human nature than a change in the positive fundamental thesis.
In other words, the market is overreacting. For them, the current malaise does not warrant a defensive posture.
The view is that positive influences still remain — relatively low inflation, stable currency, low deficits and recovering PMI reading — August reading stood at 54.6, up from 53.6 in the previous month.
No fundamentals are at risk despite the dip. That said, bears are in control for now. Question is, who’s got next?
Here’s why I am a bull. Though worries about tomorrow’s direction abound, history bears it out that the market always finds a way to be optimistic again.
Notwithstanding the economic pessimism, the intensity seen in the sell-off could soon dissipate. Why you may ask? It’s about the 3000 level. It’s the price zone chartists call a support level and fundamentalists, a psychological level.
Now, this level is important for one reason — three times in the past 10 years — October 2009, December 2011 and February 2017 — it’s faithfully served as a major roadblock for sellers. It’s possible this area could still hold for the fourth time (Note: my calls have been dead wrong before).
I believe that though closes below 3000 have been witnessed since the September 13, this does not affect the bottoming process.
Furthermore, anytime economy or market analysts begin sounding the same (holding similar bear views), it’s always a good sign that a buying opportunity is nigh. Although volatility may probably be here to stay throughout the remaining days of the year, it’s not too early investors to start considering switching the trade. This is undebatable.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
