Nifty is around the support levels of 5000 but we have seen some serious signs of panic selling in lot of midcaps/smallcaps which have knocked of 20-50% of their value in less then a week.
This sort of selling was not seen in drops till now. Although this implies a lot of pain in the short run but many stocks may create durable bottoms for long term in the process.
The post it to strictly deter investors from buying stocks just because they have fallen 20% or 30% in 2-3 sessions but one should focus on fundamentally strong stocks only. In Bear Markets the bad stocks are severely punished. Also one needs to focus on capital preservation in this period as on further falls we may not have enough cash or if we have cash may not have the guts 🙂 to buy.
Also USD-INR has almost touched 51. In 2008-2009 crisis we had seen a high of 52. This is one more factor to be noted that such a run up generally leads to massive pullouts by hedge funds leading to sharp drops in over-owned midcaps which have bad balance sheets ( Case in point – Sintex Inds. The fundamentals seem to be decent but Forex hit is killing the stock )
The strategy as before would be to buy the dips and sell the rise.As a trader this has been one of the most difficult periods over the last 5-6 years where there are way too many whipsaws and false starts. But one needs to keep their stop losses tight and exposures low till we get a good low risk-reward opportunity ( Last we had was a long at 4800 and an exit/short at 5300 )
We will look into more detailed charts by end of the week. Yet again its a good time to research fundamentally strong stocks. Readers can put in their best 3-5 picks in the comments column with reasons.