We are firmly in cyclical bear mkt

The newsflow is just not working for the market, so going forward, whether the newsflow will improve at all leading to some short covering or it will continue to be bad? If it does, will that 4,000 level on the Nifty also get eventually violated on the way down?

Going forward, there are only two scenarios. The positive scenario is that the market holds out to around that 4,000 level, the newsflow improves a little bit, some triggers come in, which could be crude or global markets and you get a short covering rally which gets the markets back.

Even if the market has to go to lower levels eventually it could seek higher levels, give you the illusion that things have mended for the better and then fall once again like it has tended to do over the last many times. The market has not fallen one way, it’s fallen to 5,000-4,800 bounced back, fallen again to 4,500, bounced back then fallen once again to 4,000; so will it bounce once again from 4,000 as a base before it falls once again to even sub-4,000 levels?

That certainly is a possibility for a market, which is quite short, but it will require a trigger to turn it around. A pullback was attempted in the middle of this week but the newsflow has been so consistently bad that pullback has got sold into once again.

The other scenario of course is that markets don’t get that pullback - small attempts are made, but they get engulfed by the bad news and don’t find support at 4,000 Nifty. It actually goes down to significantly lower levels in this round, win a climactic finish before any kind of rally materialises. On current reckoning, the way this week has ended one would tend to lean towards option two, but option one is equally possible, which is that it gets a bit better before it gets worse.

It doesn’t change the medium-term picture for equities, it still remains extremely challenging; markets are firmly in a cyclical bear market. The big question is whether things get better from a trading perspective before it gets worse once again or in this leg of the downturn you actually seek even lower levels. To that the answer is not easy to find.