The markets logged a session of blood letting as the bears slaughtered the bulls. The indices have ended at the November 2005 levels and reversed three years of gains in the last 10 months.
With the closing of the Nifty spot below the 2997 mark, the tone of the markets has now changed to a structural bear market from a cyclical bear market as the gains made from 920 to 6357 on the Nifty have been corrected by over 0.618 or the Fibonacci golden ratio.
The market breadth was outright bearish as can be expected on such a session and the traded volumes indicated a near total rout of the retail segment.
The indices have closed at the lower end of the intraday range and that too on extremely weak market internals, thereby slamming the door on the possibility of a quick recovery. The market players will now have to reconcile themselves to a prolonged and painful recovery process.
The historical experience points towards evidence that suggests that the problem is no more the price erosion alone but also the task of retaining investor interest in the capital markets. The coming session is likely to witness a range of 2840 on advances and 2350 on declines. The wide range is due to the large base effect of the Friday’s traded range.
The outlook for the markets on Monday is that of abject capitulation unless a concerted recovery effort is attempted, which may have a limited impact. Curb the temptation to bottom fish for now, unless buying for 3-5 years.
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Vijay L. Bhambwani
(CEO – BSPLindia.com)
The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com
Mandatory disclosure: the analyst has no exposure to any scrip/s recommended above.