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Nifty fell steeply on the expiry day that is almost 360 points which we saw after many months. This was followed by another by another 245 points on FRIDAY to make a fall of 600 points in 2 days. Well, caution was already exercised from 18300 levels and we were on sidelines. Though we did add small quantity in A gr shares the charm was in our selected B gr stocks which were scaling new highs or near new high even in falling markets like this. There was concentrated effort to short market in last few days due to spike in bond rates. At least bond chart suggest that and in past whenever this happened, it followed by very sharp rise. From the top of 18650 we have seen almost 1000 points yet my boundary of 17300 is protected. Nifty closed at 17750. The fall was 5.36% from the top which is almost done as there is no case of 10% fall.   

We had straight run from 14200 to 18650 and hence some correction was anticipated. We had mentioned in our earlier reports that Nifty P E has crossed 28.5 hence correction was due. We had also mentioned that even market capitalization to GDP had crossed 1.35 which was certainly in danger zone. Over and above, there was euphoria. Every nook and corner only, buy calls were flooding. After this meaningful correction, let us see, what are the factors, which will decide market trend in Nov. Let me re affirm my views Nifty will not go below 17300 and the new range seems to be 19200 though earlier I had mentioned that Nifty will not cross 18800 till Dec. However the fall has changed my levels post bounce which will be equally sharp and in V shape.

In my earlier report I had given calculations as to why we should avoid IRCTC. Big drama happened in less than 24 hours where first Govt announced that IRCTC will have to share convenience fees with Govt. As such IRCTC has only 2200 Crs revenue pre -covid and 80% comes from this source and if 50% shared then all was over. Stock reacted, 30% lower circuit 2 Crs volumes happened and Govt reversed the decision. Timing first after-market hours and latter was during market hours. Means it was known to someone who opened the circuit. Also day before when split happened there was no credit in D MAT hence no one could sell.  This should be against ethics of fair practice which allowed operators manipulate the stock. Whom should we hold responsible... the depository, co or policy makers...?  Only GOD can save traders in this country where front running is done in day light and yet no actions taken. The only poor guys who get trapped are small timers which we should call as financial encounter. Anyways, I will avoid this stock forever as I do not see anything there to buy at 250 PE.  

Alternatively, I think I am grossly underestimating the powers of India, Indian public, merchant bankers and all stakeholders. If IRCTC can trade at 350 p e and NYKAA can come out IPO at 840 PE then Nifty valuation should be 140000 ( 200 PE)   not 18000 because there is massive p e expansion. From these 2 issues I think lawyers of the Country can take this argument to the courts that all cases of penny stocks are bogus as 840 PE is well accepted norms and approved by all legal authorities. Therefore courts should accept valuations or penny stocks of 100 200 p e which they were so far rejecting.

Now let us come to ground reality to understand why markets bottomed out and will start upward journey again...

Fpi bought net Rs 53000 Crs in calendar year 2021 so far though the Oct selling was just Rs 11000 Crs as per nsdl ( some media showing Rs 20000 Crs ) followed by Sept buying of Rs 13000 Crs. This is mammoth buying of Rs 274000 Crs from May 2020 (37 $ BN). This figure is there since last few months which means FPI are churning portfolio in a big way, may be, for bonus considerations. There is nothing absurd seen in Oct selling figure. India downgrade we do not give too much weightage. It will be proved meaningless once Nifty is back to 18500.

Nifty made a high of 18650 in this settlement and many traders were long exposed. So v wap selling was must to leverage the shorts in F and O.

Generally when Street gets trapped then lower and possibly maximum lower is tried so that mark to market is received and also fat butter comes from call and put writing. Only in this settlement that is above 18100 public went long and enjoyed the rally for just 4 5 days till 18650 and the downward journey started.

Then comes the final straw on the camel's back that is India downgrade report on the expiry day. Strange that they did not get any other day. Looks like all set game. 

Earning calendar month is mostly behaves like this where Street goes long on good nos and insiders and front runners book profits. We at CNI never play the result theme.

Nifty PE has dropped to 26 from high of 28.5 where it was in danger zone. Now with 26 PE and 1 year forward PE at less than 20 I think market will bounce. One should not forget current rally happened only keeping in mind Q E and estimated earnings growth of 40 44 % in F Y 22.

The market capitalization to GDP too has come down to 1.10 from 1.35 a sizable correction. Given the Q E liquidity I think 1.10 is fair hence market looks bottomed out.

VIX has dropped by 3 % which normally should rise.

Last is that many traders have gone short with target of 17000 and market is deeply oversold.

I do not see any global reason for such sell off means it is just correction.  It is part of the process. Without such correction further rally not possible. Immediate gates open for 18650 18800  and then 21000 in 2022.

Similar fall was seen in SEPT 2020 and Nifty rose 8000 points thereafter. Every correction gives birth to new rally as BULL MARKET continues.

With MS downgrade, 37 BN $ will  not see the flight of capital but surely with Q E still in place we will see more than 37 BN $ coming in so no need to panic.  However market had proved that blind chasing stock at any valuation is dangerous. Take some money out and buy undervalued stocks.   

For the first time B gr was seen under owned as there was no pressure in the screen in any of the B gr stocks and yet investors are flush with cash.  Even M F ownership is very low which again suggest move to B Gr shares irrespective of Indices movement.

Those who play in F O stocks will have to bear with such corrections. But if you miss this correction you will be out of market for some time. For investors nothing has changed as stock prices are not much down and will rise with recovery in Nifty. Many investors sitting on cash will jump just not to miss this opportunity. 

For the first time we have segmented DIWALI picks in 3 parts…

Strong A gr shares at good discount

Strong B gr shares ready with growth at decent valuations

Probable multi baggers

This will help our followers to create wealth over a period of time.

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