Moneycontrol
Aug 12, 2017 10:38 AM IST | Source: Moneycontrol.com

Investors at crossroads: Should they buy now or wait for correction to deepen?

Ever since Nifty rallied from 9000 levels in March to Mount 1oK this year, the clamour for a correction has been growing.

Investors at crossroads: Should they buy now or wait for correction to deepen?

By Kunal Saraogi

All good things come to an end and bull markets are no exception to that rule. We know that and we seem to know that a bit too well.

Ever since Nifty rallied from 9000 levels in March to Mount 1oK this year, the clamour for a correction has been growing.

Almost everyone wanted for it to happen, experts who have been witnesses to several euphoric rallies in the past had gotten tired of cautioning against a significant correction around the corner.

Investors of all hues and stripes who sold a bit too early and couldn't muster the courage to get back in wanted to see the markets come down so they could buy back the stocks that they sold too soon.

Traders too have shorts and wanted for the markets to tank. So, almost everyone has been waiting for a correction for a long time now. This week the markets obliged them with a 3.5 percent cut in the index and stocks like Reliance were down close to 5 percent.

The question on everyone's mind now is whether this is correction enough? Should they buy now or wait for the correction to deepen?

It is a tough question to answer. Let's see if charts can be of any help answering it. There are three main inferences to be drawn from this chart for the Nifty.

1. Markets are in a long term uptrend and this week's fall is not even close to changing that.
2. Nifty is nearing a significant support region of 9650-9700. Therefore, going short now may be a mistake.

3. It is premature to say that the correction has run its course and that the uptrend will resume but a sharp flare up may be on the cards.

The real worries for an investor will start if the correction persists and transforms into a reversal of the intermediate uptrend. A scenario that is the worst nightmare of many an investor.

Should that happen, the Nifty could sink to levels of 8,900 and stocks could lose between 15-30 percent. This week's fall may have made that scenario seem less unlikely but there are miles to go and important levels to break before we start losing sleep over it.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

Disclaimer: The author is CEO at Equityrush.com. The views and investment tips expressed by investment experts on Moneycontrol are their own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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