Too Good to Be True – Are the Indian Markets Due for a Significant Correction?

September 17, 2018

Emulating the tides of global markets, Nifty and Sensex have been undergoing a seesaw ride in recent times. While many investors have gleefully jumped onto the bandwagon, where is all of this going to lead? Many investors are still apprehensive, and even more, have started thinking about sorting the market planning for its predicted, gradual downfall. So are the Indian Markets currently due for a significant correction, keeping in mind the recent trends? Is all of this merely a bubble or positive, sustainable growth?

The Situation

Sensex has been trading at an all-time high, with the new high seemingly being changed every other day. In the last year, Sensex has jumped by almost 7500+ points – a colossal one, considering its record for the years before. Similarly, the other Indian market has also been performing well, to nobody’s surprise. Nifty has also gained around 2500 points in the last year, and are trading at levels of approximately 10,800 locations.

Midcaps and small-caps, which have been downtrodden since the start of the year have also gained traction in the recent weeks. Many investors, including prominent mutual funds, have been trying to get an in on the action since the options also provide a semblance of stability and security. Large-caps have been displaying the kind of volatility which has been making many investors nervous, but many others are eagerly entering the market to make a good profit, seeing the marked, constant rising trends.

What is the Verdict?

Many experts, including reputed journalists like Marc Faber, are of the opinion that a correction is long overdue in the Indian Markets. The Sensex and the Nifty have been on a meteoric rise, with the Sensex high going as much as around 39000 points recently. Soon enough, banking firms and mutual funds are going to book in a nice profit, which is sure to snowball into a full-blown correction problem.
The depreciation of the Rupee against the Dollar and the rising prices of crude oil barrels have not helped, either – all of this has resulted in even more investor apprehensiveness. This has resulted in a loss of faith in the market, and many investors have been eagerly selling to safeguard their profits from the rise.

But What Does It Mean?

The market cycle always follows a boom-and-bust pattern – there is no hiding from that. It has been true in the case of all kinds of markets, and the Indian market cannot hide from the eventuality of a bust. However, this does not mean that you need to worry about the health of the market.

The long-term story of the Indian market is still very much on course, so long-term investors should not be worrying about the short-term trends happening. The correction is merely a chance for any long-term investors to enter the market since the valuations of fundamentally strong companies will have dropped to attractive levels. The median time for recovery of Indian markets after a correction is just 66 days – in this case, patience and a keen awareness can get you a long way ahead.

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