If you are involved in the market you have heard this one too many times, ‘Market kya lagta hai?’
What is this question and Why does everybody keep talking about it? We will try and answer these questions today.
Let’s start by understanding the question resembles (Market kya lagta hai?). It is an attempt at understanding the market and predicting it. This information can be used in two fundamental aspects of the market: Investing and
Investing is holding your assets for a longer period. Therefore, whatever you are doing in this aspect of the market, is supposed to be based on long-term stats such as the growth of the company, sector, financials of the company, etc. Therefore, as far as selection of the stock/security is concerned this question is of no use.
The only scenario I can imagine to be useful for investment purposes is when you want to add to your holdings and buy the dip. eg. Scenario: The market has been dipping for some time now and fortunately you have some money to spare and want to invest it. You being super fortunate you also have a reliable friend who knows what he is doing and whom you can approach for advice. Advice like: “Bhai, market kya lagta hai? Aur girega ki abhi invest karlu?”. It’s just human nature we want to buy at the cheapest price(bottom of the market) possible.
The trading aspect of the market is where you buy and sell a security daily (Intraday) or on a short-term basis (Swing trade). So naturally, whatever you want to do in this aspect of the market, is going to be based on short-term stats.
Coming back to the question “Market kya lagta hai?”.
How are you going to answer this in terms of short-term stats According to me, there are only two ways to answer this i.e. through News and Technical Analysis. From these two, when you are trading the news is obsolete. Let me tell you why. Ever wondered, why sometimes securities dip even when they have good earnings? The day when you thought, now is the time to buy and you end up buying at top of the market, why is that? To understand this you need to understand the term ‘discounted price’. Discounted price is the movement of the price before the news comes out or before the act even takes place. May it be a downward movement or an upward movement.
Earnings of an XYZ security is expected to release on 10th January. But assume that there is a hint in the market that the earnings of the XYZ company are good this time. Here, what happens is that the price starts to move, even before the actual public earnings release and when the earnings are released for the public, the price may come down because of profit booking.
Therefore, you can find a lot of discounted prices in the market which can make the news we are acting upon quite misleading. Thus coming to the point of discussion “Market kya lagta hai?” based on the source of news, the answer to this question can be quite misleading. Except for a spontaneous scenario like a pandemic etc.
What remains is Technical Analysis(study of market-based on charts, patterns, price action, etc.). One can definitely answer you in possibilities of what a market can do through technical analysis. This may vary based on swing trade and intraday. Sticking to our question, in the case of swing trade, it can help you in some cases to understand the market and place a trade, considering that the person answering the question is well versed in what he/she is doing. But in the case of Intraday as the market is changing throughout the day this question isn’t going to help you.
Thus, “Market kya lagta hai?” this question here is more of a self-awareness attempt one puts in understanding the markets or in some cases can just be a conversation starter. Utility-wise, it can surely be used in some cases for your benefit, but of course with caution. Do not rely on it individually. Lastly, I won’t recommend you to trust this knowledge for trading purposes especially where you use leveraging, why? Because you don’t just learn to speed up the car without learning how and when to stop it.