Nifty Small Cap 100 Index is on a downhill for the last 6 days and that got me do some work on the index
Timeframe: Jan 1 2018 to Jan 27 2023
Here is the summary:
1) Nifty was green on 56% days
2) Highest fall: 13.19% on Mar 23, 2020
3) Highest Gain: 5.44% on Sep 14, 2020
1/n
Timeframe: Jan 1 2018 to Jan 27 2023
Here is the summary:
1) Nifty was green on 56% days
2) Highest fall: 13.19% on Mar 23, 2020
3) Highest Gain: 5.44% on Sep 14, 2020
1/n
Remember, 2018, 2019 and most of 2020 were the worst years for small caps and yet 56% of the times, it was green!
It means, when it fell, it fell really bad! Let's see that data!
Since 2018, on 12 occasions, Small cap index fell for 6 or more consecutive days.
2/n
It means, when it fell, it fell really bad! Let's see that data!
Since 2018, on 12 occasions, Small cap index fell for 6 or more consecutive days.
2/n
The most recent 6 consecutive days, between
Jan 19 2023 and Jan 27 2023 - fell by 4.43%
What were the other occasions? See the graphic
2018 and 2019 were brutal and then Covid and Rus-Ukr war. Incidentally, last week's fall is the lowest for a 6 day period
3/n
Jan 19 2023 and Jan 27 2023 - fell by 4.43%
What were the other occasions? See the graphic
2018 and 2019 were brutal and then Covid and Rus-Ukr war. Incidentally, last week's fall is the lowest for a 6 day period
3/n
Why don't we take a step back and expand the boundary. Lets look at the data where small ca index fell for 4 or more consecutive days
See the graphic. Again 2018 and 2019 domination
February gets the award for "Month of the Massacre"! Second prize goes to October
4/n
See the graphic. Again 2018 and 2019 domination
February gets the award for "Month of the Massacre"! Second prize goes to October
4/n
On the positive side, April is a month where 4 or more consecutive falls have never happened!!!
Now, you are wondering "Okay, we see this, and hence what?"
More then the fall, what is more relevant is how long the recovery took, isn't it?
Let's look at the data
5/n
Now, you are wondering "Okay, we see this, and hence what?"
More then the fall, what is more relevant is how long the recovery took, isn't it?
Let's look at the data
5/n
If we look at this data of fall depth and corresponding recovery time frame, what does this tell us
1) Most time it took to recover is 3 years 5 months
2) Lowest was 2 weeks
3) On 13 out of 28 occasions (34%), recovery was within a month
6/n
1) Most time it took to recover is 3 years 5 months
2) Lowest was 2 weeks
3) On 13 out of 28 occasions (34%), recovery was within a month
6/n
So, what does that 34% telling us?
That, even if broader market was bad, there were always these mini-bull runs that were on!
2018 & 2019 were supposed to be the worst years for S.caps! Even in that timeframe, 9 out of 19 bad consecutive falls had recovered within a month!
7/n
That, even if broader market was bad, there were always these mini-bull runs that were on!
2018 & 2019 were supposed to be the worst years for S.caps! Even in that timeframe, 9 out of 19 bad consecutive falls had recovered within a month!
7/n
What else this data is telling us?
1. Small caps are on a downhill since Feb 22 & Ukraine war didn't help
2. In 2022, index tried to make a comeback but recession fears & interest rates didn't allow those attempts
3. But the key again is "there were these mini bull runs"
8/n
1. Small caps are on a downhill since Feb 22 & Ukraine war didn't help
2. In 2022, index tried to make a comeback but recession fears & interest rates didn't allow those attempts
3. But the key again is "there were these mini bull runs"
8/n
So, what do I conclude (What I conclude may not necessarily be relevant to you)
1) If the int. rates and recession story continues, 2023 could be 2019
2) However, market would give opportunities from time to time to buy and sell
3) Most 6 or more day falls didn't bode well
9/n
1) If the int. rates and recession story continues, 2023 could be 2019
2) However, market would give opportunities from time to time to buy and sell
3) Most 6 or more day falls didn't bode well
9/n
4) However, from SIP point of view, the higher the fall, better the returns.
5) Historically, when small caps go down, they go down for sizeable time frame
6) So, far its just about 12 months of downhill for small caps & it could mean, part of 2023 could continue to be bad!
10/n
5) Historically, when small caps go down, they go down for sizeable time frame
6) So, far its just about 12 months of downhill for small caps & it could mean, part of 2023 could continue to be bad!
10/n
7) Two key triggers that I would watch before i am confident about small caps bull run are
a) Demand recovery in US and Europe
b) Interest rates taking U turn & ease out cost of borrowing
Until then, for me, continue the SIPs and buy cheap & book profits is the mantra
The end
a) Demand recovery in US and Europe
b) Interest rates taking U turn & ease out cost of borrowing
Until then, for me, continue the SIPs and buy cheap & book profits is the mantra
The end
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