Yesterday, I was thinking of the new highs by NIFTY on a daily basis and then the year 2008 came to mind.
It had happened that year too.
What happened subsequently is well known to the traders from that time but most of the current generation people do not know much about that.
A question on Quora gave me an opportunity to share those times with the readers.
Please read on:
How likely is the stock market crash in 2019 or 2020 ? :
( My answer is India specific )
The year 2019 is history.
The year saw General Elections, multiple state assembly elections, recession in the automobile and manufacturing sector but markets kept on going up.
One of the prominent airline Jet Airways folded up. The state run Air India is on sale for a long while but no one seems interested. But market kept going up.
All the banks are burdened with huge Non Performing Assets. It is actually a misnomer to call them assets. Every one knows that banking business is faking the balance sheets all the time. But market kept going up.
Telephony sector could not have performed worse. Reliance Communications exists on paper. So much was made of the merger of Vodafone and Idea. Telephony as a business turned out to be a bad idea. But the market kept going up.
That was the year 2019.
NIFTY gained 12% for the year 2019.
Let us now enter 2020.
The first fortnight has been bullish.
We saw NIFTY make new record high on 3 occasions so far. Today ( January 14, 2020 ) too was a record high day.
The new all time high is 12374.25.
And it may be taken out tomorrow or any time soon.
Is a crash likely in the year 2020 ? :
I wish I knew.
I mostly trade on the short side and buy PUTS most of the time. Somehow I could make profit in 2019 even while NIFTY was moving up most of the time.
A crash would be a great bonanza for me.
Wishful thinking. Not for nothing it is said —- If wishes were horses, beggars would ride.
So, let us not ride the high horse yet.
Let us compare the situation with the last big crash which happened in the year 2008 and had its beginning in the month of January 2008.
Let us have a look as to how the market moved in those times.
NIFTY — January 2008:
Then all time high of 6357.10 was made on January 08, 2008 and within a fortnight a low of 4448.50 was seen on January 22, 2008.
That is called a crash.
Even on overall basis, the fall from 6144 to 5137 in the January month was too bad for comfort.
We have not seen this kind of month since those days of 2008.
The story of year 2008 crash can not be complete without mentioning the month of October 2008 when the crash finally reached its lowest point and started the recovery.
NIFTY October 2008 :
From 4000 level to 2252 within the same month. That is 43.7% fall.
Can we even imagine a similar scenario today. Such a fall will take NIFTY down to 6960 level.
But it happened in 2008.
Will the crash happen? :
NIFTY is trading at a P/E of more than 28. Normally one would expect a correction from such levels.
Corrections, not a crash.
Crash will occur in case there are geo-political tensions, scandals coming out from the markets world over or some big misfortune casting its dark shadow.
Otherwise, we have to live with the corrections as and when they happen.
Look at individual stocks:
NIFTY presents a rosy picture of the market.
But everything is not roses. There are thorny bushes and rotten leaves all around which nobody talks about.
Look at YESBANK, ZEEL, IDEA, RELCAPITAL, RELINFRA, RCOM, IBULHSGFIN, PCJEWELERS, DHFL, HDIL, GRAPHITE, BHEL and a multitude of the same ilk.
These stocks are the big losers in the market which is at all time high. They do not need a crash to go down.
Let us not even think about the blue chips of the year 2008 like RPOWER, JPASSOCIATES, UNITECH, SUZLON etc.
Facts, not fiction:
Talk on TV is cheap. Money is costly.
Let us compare the high of the year 2008 with the high of 2020 ( As at present ).
In 12 years, high point has moved from 6357.10 to 12374.25.
12 years for not even becoming double.
And we have to listen to all the bullshit about how the markets are delivering the prosperity.
Money would have been safer in a bank deposit and given better results —- unless one got stuck with some real bad bank. Not that any of them is good.
To Summarize :
A crash in 2020 does not look likely at present though there is a good chance for a meaningful correction.
I would happily take a crash if offered but wishful thinking can not be a plan.
The year has just begun.
Let us enjoy the ride.
All the best for the year 2020, crash or no crash.
Thanks for reading.
Images : NSE Website