Let markets find their own bottom

While it was a historical week for India following the successful launch of Chandrayaan-I, its first lunar spacecraft to the moon, the stock markets, too, had their share of history.

The Sensex recorded its second-worst fall since January this year and the biggest single-day percentage fall of 11 per cent in the last 16 years.

It has been an October that can be best forgotten. In the last three weeks, the Sensex has shed a third of its value.

From 12,526 points on October 3, the index has collapsed to 8,702 on Friday, down a whopping 30.5 per cent (3,825 points) in a matter of just three trading weeks. The average swing during these weeks was 2,000 points.

Shocking, shattering, severe ... yes it is true that the Sensex is down over 57 per cent (11,586 points) so far this year.

The magnitude and the speed of the fall has been so devastating, especially in the last few weeks, that it seems like a
bottomless pit ... but that's not true.

The markets will find their bottom somewhere or the other and some stability will be followed after that. However, predicting the bottom becomes a fruitless exercise as of now.

Hence, it makes sense to wait for the storm to be over and dust to be settled down before making sense of the support and resistance levels.

The markets witnessed carnage towards the end of the week. The Sensex, which swung nearly 2,200 points, finally ended the week with a loss of 12.8 per cent (1,274 points) at 8,701.

Among the index stocks, Mahindra & Mahindra, Tata Motors, Hindalco, DLF and Tata Steel shed around 30

per cent each. However, Satyam and TCS rallied 8 per cent each.

Last week, we had mentioned that the index would face resistance around 10,730-11,030, with support around 9,000 levels.

The index touched a high of 10,750, but on the downside, it just tumbled way past the 9,000-mark to a low of 8,567.

Just concentrating on the yearly charts, the next support levels would be around 8,000 and 7,000, respectively - the first level is the 150 per cent  retracement point, while the next one is the 162 per cent retracement point.

However, as told earlier, it is difficult to predict the bottom and one should let the markets find it themselves.

The NSE Nifty, too, moved in a massive range of 730 points. From a high of 3,255, the index nosedived to a low of 2,525 and finally ended with a huge loss of 16 per cent (490 points) at 2,584 on Friday.

The Nifty, by declining the additional 3 per cent compared with the near 13 per cent fall in the Sensex, has done some catch-up and is now down almost 58 per cent (3,555 points) so far this year.

The index is very close to its 138 per cent retracement level at 2,500, below which the 150 per cent retracement point is at 2,190 and 162 per cent retracement is at 1,875.

• Biggest falls in Indian stock market history