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Can we see deep correction in India stock market

 Discussion On Indian stock market valuations 

Can we see a big correction in the Indian stock market in the coming weeks and months? This question is running in everyone's mind. This question is also right in the mind of all of us because if we look at the Nifty levels of March 2020, then it was 7511 and if we talk about today, then Nifty is trading above 16500 levels. After all, what happened that the Indian stock markets and the stock markets of other countries showed so much upside? So let's search the answer of this question today, that too in the language of a common man. Nowadays everyone wants to explain the stock market in a simple language.

In this article you will get the answers of following questions:

  • can we see big correction in India stock market ?
  • Can 2008 financial crisis repeat in India stock market
  • Can history repeat in India stock market 
  • can we see 2008 financial crisis in India stock market
  • Lehman brothers 2008 financial crisis
  • Covid 19 impact on India stock market
  • Difference between 2008 financial crisis & 2021 crisis 
  • Can 2008 stock market correction repeat in 2021 
  • can we see correction in world stock markets 
  • can we see profit booking in indian stock market
  • profit booking in the world stock markets
  • financial crisis 2008 causes


Brief Discussion on 2008, Lehman Brothers Crisis & discussion on 2008 sensex life time high:

First we discuss what is the difference between 2008 Financial Crisis  and financial Slow Down in 2020 It is related to the financial crisis caused due to. If we understand correctly, there is a lot of difference between those two crises.  The financial crisis of 2008, which started in October 2008, created panic in all the stock markets of the world. In the time period from October 2008 to March/April 2009, the Indian stock market saw a lot of doubles. When the Sensex was trading at 21,000 levels in 2008 and made a lifetime high, there was a wave of happiness on the faces of all India traders and investors but suddenly due to the Lehman Brothers Crisis, the India Stock Market fell. A lot of selling was seen. It would also not be wrong to say that panic selling was seen in the Indian stock market, traders and investors were getting a chance to exit at whatever price they were selling and emptying their portfolio. Sensex had moved down from 21,000 levels to 8000 or 9000 levels in between.

If we talk about before 2008, India's GDP growth was also going well and as per the past data India's GDP growth was recorded at almost 8%. At that time, the arrival of such a percentage of GDP growth was considered a good sign. If we check the data at that time, India's midcap, small cap indexes were making life time highs and the stock was going very fast. There were some stocks that no one had ever heard of, but the traders of such stocks were also made a lot of money, but it is a matter of fact that the innocent investors and traders were trapped in this boom bubble and many more. All the investors and traders had also suffered huge losses. The question was in front that was the economy really performing so well that it was becoming a lifetime high in the Indian stock market and in the world stock market?

Lehman brothers 2008 crisis 

The response to this question was received when the crisis of Lehman Brothers and some other companies came in front of everyone. If the history is checked, there was a lot of buying in the real estate sector in the time frame from 2006 to 2008. Real estate stocks started making daily life time highs but now if we talk about those real estate stocks, then they don't even appear in the picture. In fact, from 2007 to 2008, when the real estate sector was witnessing a slight slowdown, many derivatives were deregulated by the market regulators from the Central Bank and the Reserve Bank side to increase the liquidity. The interest rates on loans had worked a lot. Home loans were being received in such a way that as if interest would never have to be paid on it. People invested money in real estate because they felt that the property was being available at low rates. People started buying properties at lower rates in the hope that when the real estate sector booms, they will sell the property at higher rates.

Financial institutes also gave a lot of efforts to increase the growth of housing loans, but they felt that if the loan was not returned, then the amount could be recovered by selling the assets. But at that time the financial crisis changed everything and people's jobs even went out of their hands. There is a huge difference in demand and supply. People did not have the source of income to earn money and all the subprime loans that were given started sinking. The demand for auto loans reached very low levels, the demand for housing loans became very high, and the demand all over the world dropped to lower levels and the supply market increased.

IPO’s market was at peak in 2008; similarly in 2020 to 2021 history is repeating itself:

Now let us talk about the Initial Public Offering which we call IPO. Between 2006 and 2009, a lot of IPO's started coming in India. In this article, I will discuss the names of some companies, otherwise there were many such companies which made a lot of money from the investors by selling their shares in the Indian market. At that time companies were coming up with IPOs at very high valuations. For Example: Reliance Power, Shriram EPC, IRB Infra Developers, Future Capital Holdings, Gammon Infra, NU Tek India Limited, Birla Cotsyn (India) Ltd. If we talk about the share princesses of all these companies today, then all the money of the investors is almost exhausted. The IPO of Reliance Power came at the price of 450rs at that time and is now available on 11rs. On the other hand, if we talk about "Future capital holding", then the IPO's price was 765rs and now what princesses are going on in the Future Group, the land is not hidden from anyone. IRB Infra had come with IPO on 185rs, now if we talk about the company's share price is trading below the IPO price, everyone knows about the share price of Unitech ltd. Shriram EPC price is trading around 4rs to 5rs. There are many other companies those had never given returns to their share holders.  The discussed companies names were very popular on that time in the stock market otherwise few companies like  onmobile global ipo price was  440rs, bang overseas IPO price was 220rs, Tulsi extrusion IPO price was 85rs, Gokul refoils ltd IPO price was 195rs, ksk energy ipo price was 240rs, resurge mines & minerals IPO price was 270rs. First winner’s industries IPO price was 125rs. Now  you can notice where stock prices are trading  of these companies. Even at that time, a lot of money was being raised from the market of IPO's again like 2020 is happening in 2021.

 In 2021-2022, Will the History repeat in the Indian stock market like happened in 2008-09?

IPO Market:

There is no doubt that the bull run of 2020-2021 has some similarities to the bull run of 2008. Like talking about the IPO's market, many companies are coming up with IPO's at higher valuations. The thing to think about in this is that new companies come by taking IPO's in the primary markets only when they have to. It seems that the stock market investors and financial institutions will give thumbs up to their IPO price. There is nothing wrong in this; every businessman would like to make a profit. There have been many IPOs which have given very good returns to the investors.


                      Can we see deep correction in India stock market


Real estate Market:

Talking about real estate, the recession started in the real estate sectors in 2008, before this stock market made a lifetime high. Now if seen, there was a slowdown in the real estate sector in 2017-18. To boost the growth of home loans in 2020-21, the Reserve Bank of India has kept the repo rate around 4%, while banks are also offering home loans at low interest rates. Looking at it from this perspective, there are some similarities.  If we will Talk  about the automobile sector, due to covid 19, there is a slowdown in that too, covid 19 has had a bad effect on the economy of the whole world. Low interest rates are considered a good sign that it supports the economy. But giving subprime loans at access levels can be wrong as well. Prime level loans are always worth pledging the end assets and carry a lot of risk. This loan is considered good for growth. But in the banking sector, NPA's remain a big problem. On the other hand, NPA's recovery rate is also going well in 2020-21.

Covid19 Impact on Indian economy & fast recovery from it:

The loss that has happened to the world economy due to covid 19 is not hidden from anyone. Businesses have had to face a lot of losses due to the lockdown, if India's GDP recovery rate is seen, then the recovery rate of the Indian stock market is less. It is also giving an alert to investors and traders. On the other hand, the corona vaccination rate in India is running at a very good level. The Percent Indian Government is making every effort to reduce the impact of Corona virus. Due to all these good signs, Indian stock market is witnessing a good bull run and it is expected that the economy will see a good recovery again.

Advance technology made big difference in 2008-09 working style & 2020-21 working style:

If we talk about the life time high key of the Sensex in 2008 and the new life high key in 2021, then there is definitely some big difference in these. One big difference is technology. Even in 2008, technology was very advanced, but from 2021 onwards, there was probably very little advanced technology . In 2020-21, due to covid 19, Lock down happened, but if seen there, companies also provided facilities to their employees to work from home. Use of internet is also of advanced level due to which connectivity issue has also been solved and companies are running their business easily. Online deals are also getting finalized. Youngsters' thinking has also advanced. Youngsters are easily doing work from home by using the internet. But the transportation and export sector has definitely suffered because of lockdown.

Final analysis:

If we analyze all the above factors carefully, we will see that some of the factors are matching the current time economy issue for correction after applying the lifetime high. But if you make a difference, then they are also more. In this situation, where would it be correct to book a profit, it would be the right thing to do in the Indian stock market. The valuation of India stock market is looking very high. It will take time for the economy to recover. The losses caused to the companies due to covid 19 have been managed due to the support of the government, but it will also be difficult to keep the rate of interest at a lower level for a long time. There is no doubt that the Indian stock market has given very good returns to the investors, but the valuations always matter.

In nutshell, we can say that we all should be ready to see a correction. No one can predict that the Sensex will go to 60,000 levels first, then the correction will come and before that the correction will start.

Also Read: Cartrade Tech Ipo, Should you hold or sell?

Disclaimer: Above discussion on Indian stock market is my personal view. Please do your own research before taking any decision of buying or selling. My view may differ from others person views. 

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