Why Stock Market is down today? Reason for Nifty fall

The stock market today fell by more than 1% with Nifty cracking 1.27%.

For the first time in a long time, the Nifty has broken a strong trend line support.

The break in trend line, along with serious fall in almost all listed stocks (several stocks which had run up a lot in the last few weeks, fell sharply) – this could be an indication of short term weakness in the market.

Nifty did not fall as much as the broader market. The Nifty small cap index crashed by 2.2% and the Nifty Mid cap index fell by 2.5%.

It’s time to be cautious in the short term. Any short term trading positions can be closed.

Has the time come to sell stocks held in the cash market for long term? Not really. The charts haven’t yet shown any indications that we are heading towards a major crash in the market. This could very much be a decent sized correction in a larger uptrend.

Investors who hope to be successful in the long run, have to learn to take such hits in the market. Just like you cannot punch without pulling your hand backwards, the market simply cannot rise higher with falling. That’s the nature of the market and investors have to live with the short term risk and volatility for longer term gains.

The market has gone down on each of the last 5 trading sessions (Thursday, Friday, Monday, Wednesday and Thursday). Today has been an extremely volatile day and we had warned you about this nearly 10 days ago – that the period before the budget was going to volatile.

Today, the market opened lower, recovered, fell hard and at the time of writing this (1:30PM) it’s showing signs of recovery yet again. The monthly expiry (last Thursday of every month) also happened to be today, which added to the fast movement on both directions.

We are now just 1 session away from ‘Budget 2021’. The finance minister has called it the biggest budget in a long time. Unlike last year and previous years, the expectations from this budget are low. Some are saying there will be an increase in STT, while others are expecting STCG and LTCG will be increased. All sorts of rumors going around, to create and spread fear.

However, we think the budget is either going to be favorable for the stock market or it would make no impact. Why would the government want to change the market sentiments from positive to negative – especially when it has planned disinvestments in public sector companies. It would make no sense.

We should get a clearer indication on Friday. If the market continues to go down, it could mean the budget could surprise negatively.

Another trend that I’ve been noticing over the last few sessions: The Nifty has been going down sharply, but smaller indices (mid and small caps) haven’t fallen as much. Could the big money be shifting from expensive large cap companies to quality smaller companies?

Small and Mid cap indices went into a bear market after the Budget in 2018 – when the government announced LTCG (long term capital gains). It has been 3 years since and these smaller indices have been consolidating. It’ll be interesting to see if the Budget in 2021 could trigger a rally in smaller companies, while the larger ones fall or undergo time correction. Have any questions? Want our updates? Click here to Join us on Whatsapp and get our updates.

After a sharp rally from 13300 in late-December to 14600 in mid-January, the Nifty finally showed a small dip of a little more than 1%.

Looking at the way the correction has come – it continues to look like this will be a minor down-move after which the larger trend (upwards) will continue.

The volatility is because of the upcoming budget and the upward bounce in the US Dollar index. Even the prices of Gold and Silver have witnessed a fall.

But for a market which has gone up nearly 1300 points in a space of 3 weeks – this is a minor correction. This is not (yet) a trend reversal. There is no real reason for long term investors to be worried at this point.

Like always, this is not a buy or sell recommendation. Please do your own research before taking a decision or contact your financial advisor.

Just this morning we updated this page saying a 300-500 point fall in the Nifty would be normal and healthy. Just about 2 hours later, the market started falling.

And the crash was pretty brutal with many stocks falling 10%. Some falling more and then recovering.

So why did the markets fall today? It’s primarily due to news coming out from the UK about a new mutant strain of the novel coronavirus – which is said to be spreading faster.

UK has imposed a severe lockdown. India along with several other countries have locked out flights from UK. There is fear that a deadlier version of the virus could’ve already spread to more parts of the world.

Back home in India, things seem to be pretty normal. Shops are open, people are moving around freely. And this is unlikely to change. The government is highly unlikely to impose another lockdown like it did in March – because if it does, it could do irrecoverable damage to the economy.

What’s interesting is how the UK and US markets have reacted. UK’s major stock market index FTSE 100 fell by 2.3%. The market of the country which has imposed the lockdown, fell less than India.

The US markets have also just opened. The Nasdaq is down by around 3% and Dow Jones is down by 1%. For now, there doesn’t seem to be panic out there.

The over-reaction in the Indian market could be because the market had already run-up a lot and was waiting for something to trigger a short-term correction.

For now, we strongly believe it’s just a normal correction and the market will recover after completing its correction.

Remember, the Nifty had run up from 11,500 to nearly 14,000 without a decent correction. We have said it many times, we say it again. We are still firmly in a bull market. Corrections of 5-10% are normal.

There is no need to sell everything out of fear and exit the market. Because if things rebound you won’t be able to re-enter. Many people who exited due to high valuations in August – September, have not only missed out on a large up-move in the market, but if they want to invest back – they need to do it at higher levels.

If you are a long term investor – stay invested for now.

If you are a trader – respect your stop losses with discipline. If your stop loss at index or stock level gets hit, exit.

Also, be aware that the larger trend is still upwards. Do not try to short the market. If you find bearishness during the day, you could short intraday, but do not carry your positions home – because a gap-up opening on the next day will do a lot of damage.

For investors who have cash to invest. We suggest you wait till the market stabilizes. Do not be in a hurry to invest. Divide your money into a few parts and invest in quality companies. A stock that falls 10%, will not recover within a day or two.

Investing needs to be peaceful, never be in a hurry to buy or never sell in panic.

The Nifty fell by 1.5% today and this fall has become a cause of worry for many people. Has the market made a top? Will it fall from here?

The answer to all the above questions is – no, it’s highly unlikely that a market top has been made. In fact, the market has much more distance to cover on the higher side before a top is made.

That’s what my experience of several years in the market, tells me.

The market has risen from 11600 to nearly 13200 in a straight line. From those levels at the beginning of November, there have been 11 green candles and just 6 red candles. Out of those, the direction of 3 red candles was upwards. This shows the strength of the market. It’s unwilling to come down.

And it’s unwilling to come down at a time when many people are fearful of a crash. Economic uncertainties remain. At such times, the market doesn’t usually hit a top.

Such small corrections of less than 200 points in Nifty are normal when the market has risen nearly 1500 points in just one month. That’s nearly 15% rise vs a 1.5% fall today.

Corrections like these are an integral part of the market and it keeps the market healthy.

We continue to remain bullish in the short and long term. The market is indicating economic revival in the next few years and it’s pretty much factoring-it-in well in advance.

It’s a hold for long term positions / investments. Short term trades should like always depend on your stop loss – which should be in place before you take the trade.

Do note, please consult your financial advisor before investing in the stock market. What we publish here is for educational purposes only.

Nifty fell by 1.36% on 26th October 2020. Again, it was a normal correction during times when the market has already risen a lot in the last few weeks.

The big trigger for the fall today was Reliance Industries. The deal between Reliance Retail and Future Retail ‘could’ be in trouble – after Amazon got a favorable verdict in Singapore to stop the deal from going through.

Reliance shares fell nearly 4% and since the company has the highest weightage, it brought down the Nifty.

Reliance could remain weak in the days to come, until there is clarity on the Future deal. Although this is just one of markets way to complete its correction in a company that has risen a lot. Whether the Future deal goes through or not, will not make a big difference to Reliance.

Meanwhile, the US election may not allow the market to rise, but downside looks limited at this point – as the charts continue to remain bullish.

There is still no reason to cut long-term positions.

Why did the stock market fall suddenly? This is the question that comes to our mind each time the market falls all of a sudden.

Nifty fell by 2.43% and Sensex crashed by 2.61%.

Let’s look at the chart:

The last candle on the chart – large red candle – is the one that was created on the chart today.

The market opened gap-up from the previous day and then crashed – wiping out the gains from the last 6 trading sessions.

It’s once again a ‘Marubozu’ candle which is an extremely bearish candle.

However, there is absolutely no reason to worry at the moment.

The market had shown similar falls in August, September and now in October too.

If you look at the rally in the last 2 weeks – the Nifty had moved up in almost a straight line. When this happens, a large fall like today is a normal correction. It’s healthy for the overall market and would give it strength to continue rising ahead.

The first support now is at 11600 levels. It’s unlikely to break that, but even if it does – the overall trend will still remain very positive.

Until the chart gives a very clear indication of a major breakdown – there is no reason to sell long-term holdings.

If you have any questions, you can ask in the comments section below.

Disclosure: The information posted on this page is for learning purpose only. We do not provide buy or sell recommendations here.

Okay, it was the monthly expiry day and the stock markets in India had a massive fall today. The Nifty was down by 325 points, Sensex was down 1100 points.

The other indices belonging to Mid and small caps also witnessed significant falls.

It was a market-wide correction, almost everything fell.

In such situations, you need to remember a few points:

1. Our markets are closely linked with the United States and global markets. With the US Presidential election coming up in November, there will be a lot of volatility (ups and downs).
2. The ‘Dow Jones’ had fallen by 2% yesterday, and in the last few sessions, the Indian market has moved very closely to the US Market.
3. You can make use of this correction. If you are a long term investor, then identify the weak companies in your portfolio. Sell them and buy strong / quality companies. Since everything has fallen, you will get quality companies at cheaper prices.
4. Next. Just because the market has fallen, do not put all your savings into the stock market. Remember, this could be part of a bigger fall. Keep money you require for the next few months in Savings Bank account or make a fixed deposit. If you are new to the market, keep learning. Do not be in a hurry to invest.
5. If you have excess money, look into buying good companies.
6. The traders – A lot of them have been looking at ‘Dow’ and shorting the market. They have been successful a few times, but remember – when you get confident and take bigger risks, that’s when the market will trap you. In other words, do not blindly short the market or buy ‘put’ option just because the US market has fallen. If you understand technical analysis, do your research, identify the zones and then trade with a strict stop loss.

As you can clearly see above, the Nifty has fallen sharply in the last 4 days. The fall began on Monday and since then it has been going down everyday.

There are a couple of ways to look at this.

1. The market has begun a bear run, which could mean bigger and sharper falls.
2. The market will sustain and consolidate here, and then begin its rise upwards.

Out of the two, the probability of the second seems higher. That’s because most of the fall is largely because of banking and financial stocks which have been falling heavily.

The weightage of financials is heavy in Nifty and this is why the fall appears to be larger than it actually is.

The stock that took Nifty to such high levels – Reliance Industries – hasn’t even fallen by 10%. Pharma stocks continue to perform well. A stock like ‘Dr Reddys’ has sustained very well in the last few days.

This suggests, the broader breath (or you can call it health) of the market is still healthy. The correction too is healthy in the short term as a lot of people who entered the market in the last few months – will understand that it’s not easy to make money here.

It takes time, effort and patience to succeed in the stock market.

Overall, the chart still suggests we are in an upward trend and this is only a correction. Let’s wait for the chart to suggest a clear breakdown, before we decide on cutting out long-term portfolio stocks.

We had a sharp fall today at the stock market. Nifty fell 2.21%.

Mid and small caps saw bigger falls – many stocks crashing 5-10%.

There are 2 major reasons for this:

1. The market had already run up a lot in the last 6 months – a decent correction was due.
2. Stock markets around the world are weak. This could be due to the upcoming election in the United States.

The above chart is of Nifty for the last 3 months. The candle which was created today on the daily chart was a big red candle, which we call the ‘Marubozu’ candle in technical analysis.

For more on this, you can read the detailed article on Marubozu Candle.

Usually, when such candles are created, it’s supposed to be a very bearish sign. But if you look closely at the chart, at the beginning of the month on September 4th – a similar candle was created. On that day too, the Nifty had fallen by 1.7%.

But even such candles need a confirmation of the trend on the next day. If Nifty continues its fall tomorrow, then it’ll be a certainty that the markets will remain bearish in the short term.

If it holds or rises, the fall could just be a false signal or a trap for shorters.

Today was also the first sign of significant weakness in the mid and small cap space. Many of these stocks have crashed by 5-10%. The Mid cap index fell by 5%, but these smaller indexes had also gone up quite a lot in the last few months.

Currently, it’s a wait and watch situation. Everyone is expecting the market to correct after the US election, but it could end up doing the opposite. We could have a correction before the US election and the market could continue its upward journey after the election result.

For now, traders should keep their stop losses and exit with discipline if the stop loss gets hit.

Longer term investors do not yet have much reason to worry. Such corrections are part of the market, they will happen often. If you as a long-term investor cannot bear such falls, you will not do well in the stock market.

If you are new to the market, experiencing these falls will help you in the long run. Hang in there.

Nifty was down by 1.7%, Sensex down by 1.6%. This was expected.

On 3rd September, in the US market – the Nasdaq crashed by 5% and Dow Jones was down 2.8%.

There is a reason for the fall in US markets. Stocks of technology companies like Apple, Facebook, Google, Amazon and others had moved up a lot.

For example; In February, Amazon was at $ 2170 per share (₹ 1.6 lakhs). It went down to $ 1627 (₹ 1.2 lakhs) in the March 2020 crash. Since then the stock has been on a spectacular bull run. It hit an all-time high of $3550 (₹ 2.6 lakhs) per share.

The story was the same for most major tech companies in the US. When stock price move so high in such a short period of time, they tend to exhaust. Profit booking is natural and healthy.

So it remains to be seen if this is a short-term correction or the markets will crack.

If you are wondering why we are discussing the US market here. That’s because the Indian markets are closely linked to the world markets.

Usually, when there is a significant correction in the US market, Indian markets go down too.

This is what happened on 4th September. Here too, the markets had run up quite a lot, a correction was due.

Is this going to be a major market fall? I don’t think so.

The charts are still very bullish.

As you can see, the charts are still firmly bullish. The price has been bouncing from its 20 DMA (Daily moving average). It’s also above its short term support – which is around the 11350 range.

As long as the chart does not give a clear indication of a break down, there is no reason to anticipate a stock market fall and exit stocks in the long term portfolio.

Even short term trades are a hold at this point.

At the time of writing this article, the Dow Jones crashed nearly 2% for the second consecutive day. But has now almost entirely recovered. The Nasdaq Composite was also down heavily, but has recovered – closing 1.25% down.

India is ahead in time, so the markets will be closed over the weekend. If there is a fall of 1% or more on Monday, this article will be updated with analysis on why it happened and the way forward.