When will the markets bottom out?

It’s amazing that there is no end to the yearly sell offs and the subsequent rise in the stock markets. Every year at least once the stock markets fall spectacularly leading most to believe that there is no bottom and we are in a bear run now, and then slowly recovers to remind everyone that we are in the middle of a bull run.

The reasons for this year’s sell offs are quite different from last years, this year it is the nuclear deal with US, threatening a change in the government at the centre as well as global uncertainties and hedge funds selling off in the Indian market.

What is same however is a lingering sense of confidence that everything will again return to normal and we will soon see the end of the volatility and would know that the markets have bottomed out. This is because essentially nothing has changed, the economy continues to grow with all sectors contributing, inflation is under reasonable check, we have strong forex reserves which keeps us from worrying on that account.

So what I am waiting for is the markets to bottom out. So far a sure sign of knowing that the markets have bottomed out is that it stops moving violently upwards. Till the time there are upward movements in excess of 200 points or so in the Sensex one can be rest assured that the market will go down also and that too more violently. However when the market starts slowly climbing up in 30s and 40s over one day that is when one can be assured that the worst is behind you. Typically this also happens after a few very violent downturns in which the market has fallen 5% or more in a single day. In the short run the volatility remains with a lot of wild swings which leads one to believe that the worst is not over and that there is still some downside left. However every downturn may be a good time to start buying and you need to target your stocks and start accumulating at every downturn. It might be very difficult to judge when exactly the market bottoms out if not impossible so start accumulating stocks which have been fundamentally good, but have bled simply because of the market downturn and then wait patiently. For patience is the key in this market and wait for the time when the commentators on CNBC once again declare that we are in a bull run!

Manshu Verma