Is Market Health Really Bad!! Where we are Heading to ?

Few Years Back in my 11th Grade I read that Nifty is a Benchmark Index, but today’s reality is it’s just a “dummy Index”. Any one who have High net-worth can play with Nifty index by manipulating top 3-5 large caps stocks, This is not a proper manipulation, this is just a game to show that Nifty is among the high return gainer in last 1-2 years.

As per the reports we are growing with GDP of 6-7%, but how to justify that 6-7% GDP growth ??  Here the actual game begins, as we know Nifty & BSE is a Benchmark Index and whatever happening in the economy reflects in their stock Index, so to justify we are growing with that good GDP number, Nifty have to be in the Higher upper limits. Right now We all know what’s the condition of economy ( A pure slowdown), so here one of the two this is manipulated, either GDP number or Nifty Index.

A slowdown is different from recession, In Recession every sector of market get hit very hard, In slowdown only few sectors get hit but other also get hit but in less proportionate. A slowdown is a cycle process, where one sector is down because it is interlinked with the slow down sector.

Like Auto sector is interlinked with NBFC sector, Dealers of many auto companies not able to perform day to day operations because of shortage of funds and many of them closed their shops also. In gurgaon only 6 out of 9 dealers faced notice by NBFC to clear past dues and in this way they are not able to order new stocks, that lead to unsold inventory with companies and company have to stop further productions, and that will lead to cost cutting slowing down of economy. That’s just a example of single sector, Many sectors are linked with NBFC.

NBFC crisis started exactly a year ago, when IL&FS subsidiaries starts defaulting, there are 150 subsidiaries of Il&FS, some are listed some are not listed. These 150 subsidiaries keep on giving Loan to small companies, in market terms they are know as midcap and small caps. Generally in market small caps companies will not get loan so easily as compare to reputed and large caps,  so after first default in July 2018 that loan process cycle stops and near about 200-350 small caps companies go hit hard and now result is in front of us, Many Rating downgrade is going on, Auditors resigning because company management not able to give proper comments about the loan, because many of these loans were not secured, some of them issued fake loan guarantee also.

In this all process 50% of small caps, 20% of midcaps and 10% of large-caps got hit by the slowdown, Here small caps are linked and other caps and interlinked, Small caps will bankrupt but other mid-cap and large-caps get hit by slowing of consumer growth, Less spending will be there and large-cap will issues warning of slowing down of consumption, Like wise Titan, Bata, Bajaj Finance Issued profit warning about slow down in growth. so many high growing companies will post a bit bad number in next 2 quarters.

Every single time Recovery failed at higher levels, and now slowdown is in front of us, again recovery will get delay by 4-6 months. Govt. failed to get proper indication of slowdown in sep-oct last year, and now in budget they initiate some process by allotting money to PSU to buy asset of NBFC to start recovery process, but again this will take 2 quarter to fix the problem, for long term this is good process, but short term more panic will be there.

After every 4-5 years we got hit by our own made mistakes, like in 2013 there was Rupee Crisis, and now in 2018 NBFC crisis and that bring down economy GDP. As per earlier estimated reports in 2012, our economy could hit 5 trillion mark by mid 2020, but that two crisis push that mark by 4 more years, now expectation are we will hit 5 trillion by 2024.

In market in last 1 year when ever there is a scope of recovery, at that time some bad news hit market and then again it went down.

1. July 2018 : IL&FS Crisis.
2. September 2018 : DHFL Crisis, A major panic.
3. February 2019 : Balakot strike.
4. May 2019 : Election.
5. July 2019 : Budget.
6. September 2019 : Bad result by large-caps (Expected).
7. December 2019 : GDP again Below 6.5 (Expected).

The phase of February and May 2019 was the filtration phase for good and bad shares, you can also check my full fledged article on the filtration process, Is your stocks Good or Bad, How to check via Technical Analysis ?

Last 5 months in many good shares recovery was there, and many bad companies were waiting for some bad news, both wants a trigger to initiate the next leg of selling. Good shares which recovers in last 5 months also wants a selling pressure because after every good recovery there is always a selling pressure to shake out weak hands in market, and for bad shares they were waiting for bad news, which we already get in Budget. Now the situation looks like this.

Many bad small caps are there like Rain Industries, Prakash Industries , Delta corp, Which rallied very hard in 2017 are yet to form a Bottom, expect a drop of 15-25% from Current price in these small caps. Expect Rain to drop down to 75-65 levels, Prakash will drop down to Rs 45-38 levels, Delta will drop down to 155-140 levels in next 2-4 months, and there are many more Bad small caps which got defaulted are now garbage which you can see here Link – Garbage shares

Real Market example of Good and Bad shares.

Good shares will try to touch support levels and will wait for some good news to bounce back and bad shares will show you trap rally, (Trap rally means to trap small retail investors and then stock price will go down again, it will go down to where the rally starts).

Don’t expect any good recovery in market till Oct-Dec 2019. Market will show you small small rallies but that will not sustain at higher levels, soon Large-caps will start showing you the result of slowdown, and that will create more pressure on Index.

Many Garbage and Bad shares alerted in my telegram channel, likewise started one new Telegram channel where you will get Information of your stock for medium to long term and to check whether stock is good or bad, You can ask about any World assets on my telegram id @purelogical and reply you will get in Telegram channel All World Assets Information

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