The Nirmala Put
Bear Market Bottoms are Different from Bull Market tops, in a typical Bull Market top most stocks top out at the same time whereas in a Bear Market bottom, different stocks bottom out at different time periods. For example after the NBFC Crisis in September 2018, Quality stocks bottomed out in Early Novermber 2018 whereas midcaps & smallcaps struggled further & 60% of midcaps are lower than November 2018 Levels.
What are the typical signs of a Bear Market bottom?
1) Very Bad Economic News
2) Everyone wants to sell the Rise
3) Nobody is Interested in Markets
4) Government starts tracking the Markets as much as we do because slowdown is all over the News.
The 4th Point is the Most Important point in the Indian Context because this government has failed to acknowledge that there is a massive slowdown until recently where everyone is speaking about “Mandi”.
Below is the Google Trend Chart using the search word “slowdown” in India in Last 12 Months & this gives me a lot of optimism that the end game is here.
GDP Growth of 5% was the most awaited News for me, this is of course not a surprise at all, the Markets wouldn’t have bottomed without Government support & every morning the only news I read is about “Slowdown or Mandi” in every local newspaper, this assures me that we are near the end of this bear Cycle.
When US Stock Markets lose 10-15%, You have Donald trump who tweets protect the market, I call it the Donald trump PUT. Between 2009-2014 the USA Market never corrected much because of the FED Put, as when the markets would start correcting we would have the FED who would start printing money with Its Quantitative easing. The Situation was Similar in Europe but they mostly supported the bond Market to protect their banks & they printed so much money that till today the bond yields in Germany are negative till 30 years. Infact Greece whose economy was struggling in 2012 with the Greek 10 year bond yield at 36% has now come down to just 1.60% Yield which is lower than that of USA at 1.65% Yield. This is the Power of governments & central banks when they start focusing on the economy.
The Indian Government is now focused on the Economy & everytime the markets fall 5%, you can see a new scheme by Finance Minister Nirmala Sitaraman, This is what i called the Nirmala Put. PSU Bank Merger was awaited for last 20 years, its finally getting done, history suggest’s that the Indian government will take right steps only in times of crisis (1992, 1997) & India will Autocorrect.
This is ofcourse not a recommendation & just views of the Author, Use this for Information purpose only!
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