Broader Market Indices Flashing RED – Time to be cautious
According to experts in technical analysis, the Relative Strength Indicator (RSI) is a dead giveaway of the state of the market.
When the RSI crosses the threshold of 75, it signals an ‘overbought’ stock market and invariably leads to a crash.
We saw a real-life glimpse of this in January 2018, when there was extreme exuberance amongst investors
Junk stocks were flying like rockets and investors were piling onto them like there was no tomorrow.
The RSI had crossed the warning level of 80, indicating that a mean reversion was around the corner.
Inevitably, the prophecy came true.
The overbought markets led to one of the greatest Bear markets in recent history, from which we have not yet been able to fully recover.
Presently, in January 2020, the RSI has again crossed the warning level of 80.
This is revealed by Jayesh Khilnani of ET Now, who appears to be knowledgeable about these matters.
He has warned that mid-cap and small-cap indices are in an extremely over-bought state and may crumple soon.
Broader Market Indices Flashing RED
— Jayesh Khilnani (@jayeshkhilnani) January 20, 2020
Large-cap blue-chip stocks may also have peaked
According to other experts, even blue-chip large-cap stocks are exhibiting signs of exhaustion and may require cooling down.
Sonia Shenoy rightly pointed out that the fact that HDFC Bank and Indusind Bank have reported slowdown in RETAIL portfolio and higher slippages does not auger well for sentiment.
bank nifty now down almost 400 points
kotak, indus ind, HDFC , axis all in the red
sentiment soured post HDFC bank earnings https://t.co/24wO4OL7WZ
— Sonia Shenoy (@_soniashenoy) January 20, 2020
Sandip Sabharwal revealed that he has dumped HDFC Bank on the premise that “signs of stress in the Balance sheet” are now evident and the stock may be overvalued.
We exited from HDFC Bank from all our long term portfolios today morning
1. Signs of Stress in Balance sheet now evident
2. Unsecured loans are at a multiquarter high of 17%
3. CEO change is imminent and #AdityaPuri premium should moderate
Lets see how it goes
— sandip sabharwal (@sandipsabharwal) January 20, 2020
— Subhadip Nandy (@SubhadipNandy) January 20, 2020
Lot of my Long Sl got hit.
Most likely we are topping out for correction
— TA Harsh Dixit (@HarshDixit84) January 20, 2020
If you invest in BHANGAAR stocks, you will regret forever
Vijay Kedia has been warning us for time immemorial to steer clear of ‘Bhangaar‘ stocks.
As far back as in 2015, when the Bull market was at its peak, he had cautioned us to avoid these stocks like the plague.
“There are largecap, Midcap, smallcap. There is also a "BHANGAAR CAP". 5000+ out of 6000 fit in that. They show up only in good times. Be careful,” he warned.
“Stay away from such Bhangaar caps. Else you will regret soon,” he added in a stern tone.
There r largecap,Midcap,smallcap.There is also a "BHANGAAR CAP". 5000+ out of 6000 fit in that.They show up only in good times. Be careful.
— Vijay Kedia (@VijayKedia1) December 9, 2015
Stay away from such Bhangaar caps. Else you will regret soon. https://t.co/hffAEmjRcs
— Vijay Kedia (@VijayKedia1) September 8, 2016
Recent fall in the market mainly mid-cap has proven that, investing in an honest management is the only way to be succesful in the market. https://t.co/3sJHv3z5Hd
— Vijay Kedia (@VijayKedia1) February 5, 2019
Fortunately, many of his followers obediently followed the advice and profited immensely.
@VijayKedia1 looks like you rang alarm at very right time. Hopefully many will be benefited by this. Vijayji thanks for this (Y)
— Vivek Kochar (@vivekochar) December 9, 2015
The first responsibility of a wonderful person like you ,is to define reality (About BHANGAAR CAP) !! Thank you sir ?
— Ajay Baxi (@ajay_baxi) August 9, 2017
Sir, Another BHANGAARCAP, really investors struggled come out from the stock.
50 to 2.29 (-95%). Thanks for your suggestions pic.twitter.com/AAp1IpT2fD
— Aneel (@anilsura9) October 25, 2017
However, some were defiant and tucked into junkyard stocks in their obsession to make a quick buck.
No doubt, these punters are now cutting a sorry face.
DON’T WASTE THE RALLY. Learn from mistakes & Dump Junk Stocks
The present rally is a god-sent opportunity for us to wash off our sins and cleanse our portfolios of the junk stocks.
Vijay Kedia has sent the timely reminder that we must no longer sit on our haunches and need to act fast before it is too late.
DON'T WASTE A RALLY. Learn from your mistakes. Sell your fundamentally weak stocks or Reshuffle your portfolio ( if needed). Buy peace. ? pic.twitter.com/5bRAfhTNVe
— Vijay Kedia (@VijayKedia1) January 16, 2020
The advice was warmly welcomed by many of his 3 lakh+ followers.
Sir you are my Ideal ..thank you for such mantra ??
— Atul Shukla (@bahot_seedha) January 16, 2020
Very Rightly Said My Dear Sir ……..
— Lokesh Mishra (@mishralokesh11) January 16, 2020
Whether it's bear or bull phase always gives right advice and moral support…..??
— Pritpal Singh (@Pritpal48603504) January 16, 2020
Great advice Sirji ??
— Mahendra Oswal (@MahendraOswal8) January 16, 2020
Which are the quality stocks to buy now?
Naturally, the question will now arise as to which are some of the top-quality stocks that we can cheery-pick from.
Thankfully, there is no dearth of recommendations from reliable and trusted sources.
Vijay Kedia has himself hand-picked a fail-safe quality stock for us to invest in (see Top 10 Stocks For 2020: Vijay Kedia, Basant Maheshwari, Sandip Sabharwal Recommend Ten Blue-Chip Stocks).
HDFC Sec has helpfully prepared a list of Top 10 High Earnings Growth Portfolio Stocks To Buy Now.
Prabhudas Lilladher has advised that it is better to trust ex-multibagger stocks because they have a proven track record.
They have prepared a list of “attractive ex-multibaggers” comprising of mid, small & microcap stocks.
Karvy has also risen to the occasion and provided us with a list of the best large-cap and mid-cap stocks that we can fearlessly invest in (see Top 10 Large-Cap And Mid-Cap Stocks To Buy For 2020 (Up To 40% Upside)).
No doubt, these stocks will hold us in good stead and lead to our prosperity even if there is a crash in the markets, as feared!