Everyone has been too focused now to look at the things that are going wrong and it is an obvious thing to do when the stocks in portfolio has corrected anywhere between 50% to 70% or probably more.
Nifty has corrected towards 10780 from the life time high levels of 12100 since June 2019 onwards but Midcap and Smallcap indices have shown sharp correction in comparison to Nifty. The stocks have shown serious capitulation during this period.
During systematic selloff there will be a few stocks that will outperform. Not necessarily by rising but atleast moving in a range or falling little as compared to others. These stocks actually exhibit more time correction then price. Once the cycle turns up these stocks can start showing impulsive rise.
Out of portfolio of stocks not all will deliver the way it is expected but a few will drive the portfolio drastically higher thereby generating stronger returns. By simple observation and application of Elliott wave methods on fundamentally strong stocks can provide excellent opportunity to buy the stocks during such corrections and hold on to them for the down cycle to get over.
Now look at the correction seen in the Midcap index. The following was published in the monthly research report
Nifty Midcap weekly chart
Nifty Midcap 50 index Price to Earnings ratio
chart by trendline
Following is the gist of research published in previous monthly research
The Euphoric rise that began from the year 2013 stalled in early 2018, post which Nifty Midcap index has been witnessing correction. We can clearly see sharp correction on downside from 22000 levels to the low of 16000.
This sharp correction also helped Price to Earnings ratio to cool down from above 100 levels towards much sensible level near 30. However, it is still elevated compared to historical past and so few more months of correction cannot be ruled out. This simply shows the usage of a fundamental parameter when plotted provides such strong technical outlook.
Now during this period we think it is time to slowly and steadily build portfolio of stocks that have been major outperformers. Corrections are always good for identifying gems from long term investment purposes.
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