Nifty has seen 4 major selloffs since October

By Anichya Shah, CNBC-TV18

Markets have seen four major corrections in past three months; selloff not greater than 10%; with markets retracing post 5 - 7% correction.

As we enter this bit of correction ,we have seen similar situation as in the last three-four months. In fact, since October, the markets have seen four major corrections and these are corrections over 5%, but below 10% mark. Most of the markets in India and most of indices have retraced after correcting about 5% since last three months.

We have seen that it takes about four-seven trading sessions over the last three months for these corrections to last and they have retraced these levels between two-nine trading sessions. The strongest Index in these corrections since October has been the consumer durable index - that’s been the most resilient and it’s bounced back to sharpest at around an average 12% bounce back. 

The metal index, the Bank Nifty index and the BSE PSU index have been the most volatile; seen the sharpest cut and sharpest bounce back as well. But the smallcap and the midcap index excluding this correction have been the most resilient and have seen strong bounce backs. Traditional defensive plays, FMCG, the IT space and even the healthcare space have been relatively raised but have not been able to pullback sharply.

From 16th to 22nd October - that period of five days, the market corrected about 8.5% and it took four days to recover from that correction. Between 2nd and 12th November, the market corrected about 5% in seven trading sessions, recovered those losses in about two trading sessions. Then between the 19th to 22nd November, the market corrected about 7%, recovered that about in nine days, 12th to 19th December in a period of six trading sessions market corrected another 7%, recovered those losses in eight days.

So as we get to higher levels, the time the market takes to retrace these corrections in days is increasing and if one looks at this time, what’s really different is that besides the global uncertainty that played since October, we have huge number of IPOs hitting the market, we are in result season, Budget expectations have pretty-much arrived; besides that, the Sensex and Nifty have only corrected about 4.5%, if one takes today’s losses into consideration.

So considering the recent past selloffs which is slightly over about 5-6%, we may still have a fair bit of correction to go and besides that, a lot of key global markets are trading at critical support levels considering that most of them have given negative returns since the beginning of 2008. These are factors to watch out for and we have seen the midcap and the smallcap index sell off a fair bit more than the Nifty.

So whether we will retrace these levels or whether the selloff will continue, must be watched out for.