Shabbir Bhimani

Wanna invest in the right stock at the right price & at the right time.

Why Market Decline Despite Good News?

If you look at the charts of Nifty on 16th May 2014, it looks like this.

Nifty_16May2014

Made a high of 7550+ but as the results were more or less confirmed, it started tanking and made of low below of 7150 and closed around 7200. Almost selling off 400 points in the matter of hours.

If we look at the 9 months chart of Nifty, we clearly see market making new highs.

NIFTY_Daily_9m

Forming one of my favorite pattern which is run-up to the news and tanks if news is great or even good but if news is bad its just bleeds. Check out second reason in this article why this pattern forms and repeats itself.

This is where the Indian retail investor are trapped who happen to invest after the news is out. If we look at the Indian Rupee to USD, we see that it has fallen from 63ish odd levels to 58ish odd levels in last 3 months clearly indicating lot of money entering India to be invested especially in Indian Stock Market.

So this may not be the right time to be going long and it is better to be keeping the money in the sideline.

Charts by Chartink.com and Yahoo Finance

Wanna invest in the right stock at the right price & at the right time.

  • Gladwyn

    Dear Sir,

    Good & useful write-up. There is a say’buy on rumor and sell on news’. This time also it was correct. But, don’t you think market will NOT crash but stabilize at these levels? Also, don’t you
    think depending on allotment of minister portfolios, volatile will return in selected sectors??. My opinion is until June market mood will be good before catching up with realities. Regards.

    • Gladwyn, even if market consolidates or corrects, there is no ways long positions can make profits and so no reason to be risking your long positions. Better to unwind and take a break till June.

  • NARINDER

    SHABBIR JI ….WHAT WILL B THE TREND OF DOLLAR IN COMING MONTH ?

    • I see the decline continuing for little more time and then may be a consolidation Narinder.

  • vij

    Tanking of 350 pts in Nifty after the rally following better than expected good news was not surprising. The entire mkt was as such in extremely overbought state due to hope rally from 6300 to 7280 in nifty. CCI and RSI were clearly showing it on 15 May. Initial massive spike on 16May made the mkt further overbought and it could not sustain 7550+ levels. Once it started moving down, the pain selling started to book max possible gains. I expect to below 7000levels before any possible weak rally again on some good news .

  • Ravi Sharma

    Nice one.
    The reason what I think is for there was no build up for news for stock market. If we see the 2009 exchange put circuit break for market for a day because investor thought it will going to be coalition govt. but Congress got mejority. But this time investors knew Modi getting Majority. When Rajnath Singh announced that its going to be NDA govt. Index points started coming down.

    • That means unexpected good results can get a circuit but known good results can always lead the run-up and then on the news days there will be profit booking.

      • Suresh

        Right. I have also booked profit in some shares at the commencement of market and I expect the correction soon.

  • Raviraj

    Good article.
    I think we can directly correlate inflow FII funds to stock market and every time funds flow in market is bullish and when funds flow out market goes for a strong correction.

Shabbir Bhimani

Royal Heritage,
New Rander Road,
Near Causeway Circle,
Rander Surat - 395009
Gujarat India
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