The way markets are moving, it just reminds me of that Jaspal Bhatt show Ulta-Pulta. Everything has become Ulta-Pulta.
Gautam Shah: I understand that sentiment, but there was a period in the last couple of years where nothing was Ulta-Pulta, the trend was as clean as it can get. It could have got just about every stock, every sector, every trend in the market was as clean as it can get. So, this is typical mean reversion. I mean, I know everybody is making a lot about what has happened in the last three months, but if you really read this correction in the context of the rise of the last 15-18 months, honestly, it is not much. I think there was a little bit of madness on the screen last August, September with the midcaps, smallcaps, SMEs, story-based stocks, narrative-based stocks, all of that has happened and I do believe that this is a very healthy correction within the larger bull market and I think there is a case of irrational pessimism at this point of time. I know when you look at the screen and moves like yesterday, you will get confused, you will get scared. But if you stick to quality stocks, this market still has a lot of potential and mind you, it is just Indian markets which have just moved off the track.
If you look at global markets, US is in a great place, Asia has been doing well, European markets have done well. So, there have been local issues on what the rupee has done, what the dollar index has done, what oil has done, FII selling, a bit of a slowdown on the earnings.
So, all of those factors have been factored in, in these last two, two-and-a-half months. But at 23,000 index, give or take 2-3%, I think this market has once again come to a point where the risk-reward is justified to take investment longs. So, six months from now, when we will analyse January 2025, in hindsight would that be called as the best buying opportunity of this bull market?
Gautam Shah: I think so and you will be amazed to know that in the last 25 years, we track data all the way back from 2000, January is known for its challenging times, it is known for its market tops. If you remember, it happened in 2008, it happened in 2000, and many other years where you have had historic market tops or market corrections in the month of January. This time was expected in some sense because the GDP numbers were terrible, people were concerned about the slowdown, the Trump factor, what the RBI does, the budget expectations, given all that has happened in the last two years, but I do believe that this is a great buying opportunity.
Because as a technical analyst, when I read the weekly and the monthly charts, I am encouraged to believe that this is a correction within the larger bull market, that is the only thing you need to answer. If you are thinking two weeks and two months, this market will be very difficult for you. But if you are thinking 6 months, 12 months, 18 months, I think the risk-reward is justified.
So, what is the range that you are calling for the Nifty? We have already fallen over or about 12% at an index level alone. How much more of a cool off can we see from these levels? And what is the plausible upside?
Gautam Shah: Well, see, on an index level, as you rightly said, we fall at about 12%. But the average decline in all of NSE is about 26%, so that is the kind of disconnect that you have seen between the indices and the overall market.
So, in some sense, in the last four months, we have already seen a very large bear market and it is only the top quality stocks which have come under pressure in the last three weeks as you might have noticed because I think midcaps and smallcaps, in some sense, have really stopped correcting. If you look at the midcap and the smallcap index they have not done anything, in comparison to the rise that we have seen in the last 15 to 18 months.
But coming back to your point, how much more weakness. Let us put two scenarios. The more optimistic scenario is that the market bottoms out somewhere in this 22,800, 23,000 area, which I think is very important based on multiple studies, breadth studies are oversold, sentiment is oversold, it cannot get worse in terms of sentiment.
So, optimistic scenario is we bottom out somewhere here, 22,800 to 23,000. Pessimistic scenario is that if the budget does not go off well, FII selling continues, the results do not go off well, HDFC Bank does not surprise positively, then we go down to that 21,800, 22,000 zone, which I think is really the worst case which I am looking at. But look at the bigger picture.
So, even from current levels, your downside potential is about 4%. But if everything goes back on track, I am quite confident that over the next 18 months, you could see the Nifty move towards 26,000 and possibly even at 28,400. So, 4% downside risk, 20% upside potential, that is the risk-reward an investor has at this point of time.
