Fear is Taking Over D-Street

Feb 9, 2022

Brijesh Bhatia, Research analyst

If you've been tracking the markets regularly, you would have surely noticed a change in sentiment.

While there was only positivity a few weeks ago, now people are worried.

The sentiment has shifted from greed to fear. And this has implications for traders and investors.

In this video, I'll discuss this change in sentiment and share my view on it.

Hello viewers. Welcome to the Fast Profits Daily. Myself, Brijesh Bhatia.

Well the Nifty has been trending in a range for quite a long time between 16,500-16,800 to about 18,000.

Get Full Details: Richa is Very Bullish on This Smallcap Stock

We saw a dip back from around 18,000 back towards 17,000 and the fear on the street is day-by-day, increasing.

I want to show a couple of charts which is indicating that the fear is day by day, increasing if you look at the February.

 

First let's look at the Nifty 50 chart over here. If you look at the lower panel, which is the fear and greed indicator, the start from 2020, the momentum has been stronger where we have a low of around 7,500 and back towards 18,000 levels. But if you look at the fear over here, it has been for the last quite a few months, it has been dipping.

So the green line where the greed was there, it's slowly and steadily falling down and in February, when markets has been volatile has dipped by 4-5% from the higher levels, it has gone into the fear. When the markets are trending higher and the fear is increasing, it's a sign of caution for me.

If you look at the Nifty 50 from a monthly scale we have not closed over 18,000. Although we twice visited 18,300-18,600 levels but on monthly closing basis, it never ever closed above 18,000. This is also a sign of resistance I would say on a monthly basis.

 

Second, if I look at the broader market, a similar structure. The fear is increasing day by day even when the markets are trending at the higher levels.

Though the midcaps have outperformed the markets by huge margin and even smallcap index has been trending higher, but the broader market of Nifty 500 stocks which comprises of the bluechips and the higher level midcaps, are indicating that the fear on the street is increasing day by day.

The only survivor I think, however, can be the market's strength to close above 18,000 on monthly basis where the fear might slow down and we might see a new momentum coming into the market.

 

FIIs have been on a selling streak for quite some time, a few months now. If you look at the advance-decline line for Nifty 500 on your screen, we are around 47% on the advance-decline line.

If you look at 2020, where the V-shaped recovery happened into the markets and the advance-decline saw a V-shaped momentum in December and January, if look at the advance-decline, it went to around 30-35%, which was back towards the corona virus when the fear was at the extreme levels.

So I think with the fear on the street, there is profit booking from the FIIs. If you look at the midcap stocks, the stock selection momentum, is very crucial in this market and there is no broader market momentum happening into the Nifty 500.

So I'll stay cautious in case markets on a monthly scale doesn't cross new highs or if in case there is a dip and there is extreme fear in the markets, that could be the best level to enter again into the midcap and smallcap space.

Till then, it could be a trading space where stocks are trending between 15-20% on the higher and lower side and the momentum could continue. But as an investor, I think I'll wait for fear to end and the greed to come back in the markets.

So all into the today's video and just keep a watch on this fear and greed indicator. Where the fear ends, greed might come back, and we might see the market looking very, very attractive or a bargain buying level for investors.

Signing off, Brijesh Bhatia.

Warm regards,

Brijesh Bhatia
Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)

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