In March 2020 last year, the threat of Covid became real and we saw the world acknowledge it with one of the biggest sell-offs of the decade. The stock markets crashed in the third week of March and boy did they crash well.
However, the recovery since that fall has been mind-boggling. Nifty was trading around 7550 on March 23 last year. In January 2021, we saw the index break an all-time high and trade values around 15250. That is a growth of 100% in 8 months. Allow me to re-emphasize that these numbers are ridiculous.
The most shocking part, though, has been the rise of stock markets even as Covid went berserk. In retrospect, the growth can be attributed to the rise of the global IT and pharma sector, liberalization of policies to ensure increased liquidity infusion in the markets, and Covid19 government packages. Safe to say, it has been a ‘V’ shaped recovery- so far.
Now, coming to the question at hand. Should you invest in Indian stocks/mutuals funds as things stand now? My opinion is NO. The corona cases in India are on the rise again and the second wave is imminent. It seems highly likely that partial lockdowns will be in place in most parts of the countries and impact businesses. Moreover, we’ve seen with other countries that wave 2 is much more dangerous than wave 1. From a technical indicators point of view, Nifty is trading in mid 14000s which is substantially higher than its 100/200-day moving average.
I know what you’re thinking- the same happened last year and markets were extremely bullish then. However, I don’t think it is the same this year. Firstly, there will not be any new government package this time around. RBI is not going to print more money and inflate the markets. The salaried professionals have already invested most of their money in mutual funds so there’s no additional source of money to keep markets inflated at these values.
I see a dip coming. A dip that’ll push Nifty down to ~12400 - the most important support zone. That’ll be a time to buy. In fact, that’ll be a time to buy big. Again, I can be totally wrong here so please consider this sentence as that disclaimer after the mutual fund advertisements.
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