Could the Nifty lose another 1,000 points? A market veteran explains.
Subscribe to enjoy similar stories. Last week Indian equity markets fell through support levels like a hot knife through butter. Are the markets falling to rise (‘correcting’ in market parlance) or are they falling to fall (‘making a top’)? In this article I’ll walk you through market data to help find the answers.
These are techniques that real-world traders use daily. The stunning decline in equity markets last week took many retail investors and traders by surprise as the average Joe had been anticipating ever more bullish price targets month after month. Everything seemed right.
Sentiment was gung-ho and markets seemed to be brushing off news of the Gaza war. The fall, therefore, delivered a massive jolt. In my opinion, it sowed the seeds of further declines.
If you have been trading over the past four months, you will recollect the sudden mini crashes on 4 June (election results), 23 July (budget announcement), 2-5 August (mini sell-off) and 3-6th September (another mini sell-off). The election-result and budget-day falls caused the biggest damage to retail traders. Though retail traders persisted in partially holding their longs (statistical evidence follows), their confidence levels had eroded by the end of September.
That was confirmed by the plunging of turnover in the spot and stock futures segments to April 2024 levels. Also read | Oversold and overlooked: Emerging opportunities in this fearful market When traded volumes fall, the bid/offer spreads widen. When you check the best five buyers and sellers’ limit orders on your terminal screen, the difference between the buyers’ and sellers’ limits are called “spreads".
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