Article

Why Stock Market is down today? Reason for Nifty fall

Whatsapp Follow

Why stock market is down today? Each time the market falls, everyone wants to know why the market is falling and more importantly – whether it’ll fall more.

On this page, we’ll try to analyse each time the market falls by 1% or more. In other words, if Nifty falls by more than 1%, we will post our analysis at the bottom of this page.

Update 25th November 2020: Today the Nifty and the Sensex crashed by 1.5%. Is there a reason to worry? No, not really. The market has run up a lot and the correction today will be considered ‘normal’ and ‘healthy’. Markets never run up in a straight line. Ups and downs are part of the market. Get used to it if you want to make money from the stock market. Detailed update has been posted below.

Why does the stock market fall?

The answer is simple.

In the short term, the market moves because of buyers, sellers and their sentiments (i.e emotion, opinion or feeling).

When the strength of selling is more than the strength of buying, the market tends to slide downwards.

This leads to negative sentiment, which results in more selling.

As the selling increases, the sentiment worsens – finally leading to what is called as ‘panic selling’ – where people fear the worst and begin to sell.

This is exactly what happened in March 2020, when the fear of Covid-19 and economic depression was so severe – that people were just selling their shares and exiting the market.

When the sentiment is like what it was in March 2020, there are only sellers and very few buyers.

When the market is rising, the opposite happens.

The sentiment was terrible in March 2020, but once the market started to rise – sentiments slowly began to improve. And now, 5 months after the crash – the market is back to where it was.

If you stopped tracking the market in February and returned in September – many stocks have gone past their all-time high prices.

Market Falls are faster than rises

It’s like taking the stairs to go up and coming down on the elevator (lift). The fall is quick. The rise is usually much slower.

Another example could be a roller coaster. The move upwards is always slow and steady, the fall is quick and brutal.

Months and years of gains can be wiped out in days. This is why people fear the fall.

Before you even get a chance to react, the market could be down 10-20-30%.

Successful investors can handle market falls

If you want to be a successful investor or trader – you have to understand, rise and fall are part of the stock market.

Learning to handle the volatility is part of the learning process in the first few years.

Remember, if the market has to rise higher, it has to fall before going up. It’s like a punch – you have to move your hand backwards and then push it forward with force. That force to rise, only comes after a pullback.

Why Stock Market is down today?

The analysis in this section will be fundamental as well as technical (charts).

1.5% Nifty Crash on 25 November 2020

The Nifty fell by 1.5% today and this fall has become a cause of worry for many people. Has the market made a top? Will it fall from here?

The answer to all the above questions is – no, it’s highly unlikely that a market top has been made. In fact, the market has much more distance to cover on the higher side before a top is made.

That’s what my experience of several years in the market, tells me.

The market has risen from 11600 to nearly 13200 in a straight line. From those levels at the beginning of November, there have been 11 green candles and just 6 red candles. Out of those, the direction of 3 red candles was upwards. This shows the strength of the market. It’s unwilling to come down.

And it’s unwilling to come down at a time when many people are fearful of a crash. Economic uncertainties remain. At such times, the market doesn’t usually hit a top.

November 25 2020 Stock Market and Nifty Fall

Such small corrections of less than 200 points in Nifty are normal when the market has risen nearly 1500 points in just one month. That’s nearly 15% rise vs a 1.5% fall today.

Corrections like these are an integral part of the market and it keeps the market healthy.

We continue to remain bullish in the short and long term. The market is indicating economic revival in the next few years and it’s pretty much factoring-it-in well in advance.

It’s a hold for long term positions / investments. Short term trades should like always depend on your stop loss – which should be in place before you take the trade.

Do note, please consult your financial advisor before investing in the stock market. What we publish here is for educational purposes only.

Nifty fell by 1.36% on 26th October 2020. Again, it was a normal correction during times when the market has already risen a lot in the last few weeks.

The big trigger for the fall today was Reliance Industries. The deal between Reliance Retail and Future Retail ‘could’ be in trouble – after Amazon got a favorable verdict in Singapore to stop the deal from going through.

Reliance shares fell nearly 4% and since the company has the highest weightage, it brought down the Nifty.

Reliance could remain weak in the days to come, until there is clarity on the Future deal. Although this is just one of markets way to complete its correction in a company that has risen a lot. Whether the Future deal goes through or not, will not make a big difference to Reliance.

Meanwhile, the US election may not allow the market to rise, but downside looks limited at this point – as the charts continue to remain bullish.

There is still no reason to cut long-term positions.

Why did the stock market fall suddenly? This is the question that comes to our mind each time the market falls all of a sudden.

Nifty fell by 2.43% and Sensex crashed by 2.61%.

Let’s look at the chart:

Stock Market Fall 15 October 2020

The last candle on the chart – large red candle – is the one that was created on the chart today.

The market opened gap-up from the previous day and then crashed – wiping out the gains from the last 6 trading sessions.

It’s once again a ‘Marubozu’ candle which is an extremely bearish candle.

However, there is absolutely no reason to worry at the moment.

The market had shown similar falls in August, September and now in October too.

If you look at the rally in the last 2 weeks – the Nifty had moved up in almost a straight line. When this happens, a large fall like today is a normal correction. It’s healthy for the overall market and would give it strength to continue rising ahead.

The first support now is at 11600 levels. It’s unlikely to break that, but even if it does – the overall trend will still remain very positive.

Until the chart gives a very clear indication of a major breakdown – there is no reason to sell long-term holdings.

If you have any questions, you can ask in the comments section below.

Disclosure: The information posted on this page is for learning purpose only. We do not provide buy or sell recommendations here.

Okay, it was the monthly expiry day and the stock markets in India had a massive fall today. The Nifty was down by 325 points, Sensex was down 1100 points.

The other indices belonging to Mid and small caps also witnessed significant falls.

It was a market-wide correction, almost everything fell.

In such situations, you need to remember a few points:

  1. Our markets are closely linked with the United States and global markets. With the US Presidential election coming up in November, there will be a lot of volatility (ups and downs).
  2. The ‘Dow Jones’ had fallen by 2% yesterday, and in the last few sessions, the Indian market has moved very closely to the US Market.
  3. You can make use of this correction. If you are a long term investor, then identify the weak companies in your portfolio. Sell them and buy strong / quality companies. Since everything has fallen, you will get quality companies at cheaper prices.
  4. Next. Just because the market has fallen, do not put all your savings into the stock market. Remember, this could be part of a bigger fall. Keep money you require for the next few months in Savings Bank account or make a fixed deposit. If you are new to the market, keep learning. Do not be in a hurry to invest.
  5. If you have excess money, look into buying good companies.
  6. The traders – A lot of them have been looking at ‘Dow’ and shorting the market. They have been successful a few times, but remember – when you get confident and take bigger risks, that’s when the market will trap you. In other words, do not blindly short the market or buy ‘put’ option just because the US market has fallen. If you understand technical analysis, do your research, identify the zones and then trade with a strict stop loss.
Market Fall 24 September 2020

As you can clearly see above, the Nifty has fallen sharply in the last 4 days. The fall began on Monday and since then it has been going down everyday.

There are a couple of ways to look at this.

  1. The market has begun a bear run, which could mean bigger and sharper falls.
  2. The market will sustain and consolidate here, and then begin its rise upwards.

Out of the two, the probability of the second seems higher. That’s because most of the fall is largely because of banking and financial stocks which have been falling heavily.

The weightage of financials is heavy in Nifty and this is why the fall appears to be larger than it actually is.

The stock that took Nifty to such high levels – Reliance Industries – hasn’t even fallen by 10%. Pharma stocks continue to perform well. A stock like ‘Dr Reddys’ has sustained very well in the last few days.

This suggests, the broader breath (or you can call it health) of the market is still healthy. The correction too is healthy in the short term as a lot of people who entered the market in the last few months – will understand that it’s not easy to make money here.

It takes time, effort and patience to succeed in the stock market.

Overall, the chart still suggests we are in an upward trend and this is only a correction. Let’s wait for the chart to suggest a clear breakdown, before we decide on cutting out long-term portfolio stocks.

We had a sharp fall today at the stock market. Nifty fell 2.21%.

Mid and small caps saw bigger falls – many stocks crashing 5-10%.

There are 2 major reasons for this:

  1. The market had already run up a lot in the last 6 months – a decent correction was due.
  2. Stock markets around the world are weak. This could be due to the upcoming election in the United States.
September 21 2020 Stock Market fall

The above chart is of Nifty for the last 3 months. The candle which was created today on the daily chart was a big red candle, which we call the ‘Marubozu’ candle in technical analysis.

For more on this, you can read the detailed article on Marubozu Candle.

Usually, when such candles are created, it’s supposed to be a very bearish sign. But if you look closely at the chart, at the beginning of the month on September 4th – a similar candle was created. On that day too, the Nifty had fallen by 1.7%.

But even such candles need a confirmation of the trend on the next day. If Nifty continues its fall tomorrow, then it’ll be a certainty that the markets will remain bearish in the short term.

If it holds or rises, the fall could just be a false signal or a trap for shorters.

Today was also the first sign of significant weakness in the mid and small cap space. Many of these stocks have crashed by 5-10%. The Mid cap index fell by 5%, but these smaller indexes had also gone up quite a lot in the last few months.

Currently, it’s a wait and watch situation. Everyone is expecting the market to correct after the US election, but it could end up doing the opposite. We could have a correction before the US election and the market could continue its upward journey after the election result.

For now, traders should keep their stop losses and exit with discipline if the stop loss gets hit.

Longer term investors do not yet have much reason to worry. Such corrections are part of the market, they will happen often. If you as a long-term investor cannot bear such falls, you will not do well in the stock market.

If you are new to the market, experiencing these falls will help you in the long run. Hang in there.

Nifty was down by 1.7%, Sensex down by 1.6%. This was expected.

On 3rd September, in the US market – the Nasdaq crashed by 5% and Dow Jones was down 2.8%.

There is a reason for the fall in US markets. Stocks of technology companies like Apple, Facebook, Google, Amazon and others had moved up a lot.

For example; In February, Amazon was at $ 2170 per share (₹ 1.6 lakhs). It went down to $ 1627 (₹ 1.2 lakhs) in the March 2020 crash. Since then the stock has been on a spectacular bull run. It hit an all-time high of $3550 (₹ 2.6 lakhs) per share.

The story was the same for most major tech companies in the US. When stock price move so high in such a short period of time, they tend to exhaust. Profit booking is natural and healthy.

So it remains to be seen if this is a short-term correction or the markets will crack.

If you are wondering why we are discussing the US market here. That’s because the Indian markets are closely linked to the world markets.

Usually, when there is a significant correction in the US market, Indian markets go down too.

This is what happened on 4th September. Here too, the markets had run up quite a lot, a correction was due.

Is this going to be a major market fall? I don’t think so.

The charts are still very bullish.

Market fall - Nifty 4 September 2020

As you can see, the charts are still firmly bullish. The price has been bouncing from its 20 DMA (Daily moving average). It’s also above its short term support – which is around the 11350 range.

As long as the chart does not give a clear indication of a break down, there is no reason to anticipate a stock market fall and exit stocks in the long term portfolio.

Even short term trades are a hold at this point.

At the time of writing this article, the Dow Jones crashed nearly 2% for the second consecutive day. But has now almost entirely recovered. The Nasdaq Composite was also down heavily, but has recovered – closing 1.25% down.

India is ahead in time, so the markets will be closed over the weekend. If there is a fall of 1% or more on Monday, this article will be updated with analysis on why it happened and the way forward.

If you liked the article, do follow us on WhatsApp, Twitter, Instagram and Facebook.
Whatsapp Follow

Leave a Comment