Buy and Sell Strategy
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31 May, 2021
8 min read
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There are countless proverbs that are employed to offer caution and comfort to stock market investors: This includes “what goes up, must come down” which to be fair is a proverb that actually borrows from one of Newton’s laws of physics.
There is also “this too shall pass” and one by The Motley Fool co-founder David Gardner: Stocks always go down faster than they go up, but they always go up more than they go down.
First things first – the dips and rallies (or the drops and rises) of the stock market are not to be criminalized. It is the volatility of the stock market that makes it possible for investors to earn in the first place.
However, when the Sensex crashes, it generally means trouble because the Sensex is sort of like an indicator of the overall stock market and the overall economy’s health, not to mention the outlook of the public. That is because the Sensex is a collection of the 30 biggest and most popularly traded stocks on the Bombay Stock Exchange. These companies are firmly established, they are usually in the pink of financial health and their stocks are typically in great demand, with inclining stock graphs. Since there is no real reason for these stock prices to go hurtling into the ground other than demand and supply, the Sensex crashing is a clear indicator of overall negative investor sentiment. It usually stems from some sort of undesirable economic news or occurrence. When the Sensex crashes, investors start to panic still more. They might start to dump stock and then the prices of those stocks start to plummet too. You get the picture.
Here are fifteen instances – well 14 years to be precise, because some years had multiple instances – in which the stock market displayed truly remarkable highs and lows. In some cases we might also be able to point to a specific cause for the dip or rise. Let’s take a walk down memory lane:
When the market rallied
We’re starting out with the happier part of this history lesson. We’ll observe the bloodbaths later.
- 1990
The Sensex celebrated a milestone in July 1990 when it crossed four figures for the first time in its history closing at 1001.
- 1992 x 4
This year is very interesting because not only did it witness four rallies but also a dip as you will see in our later section on stock market lows. The market crossed 2000 points in January, then 3000 in February, 4000 in March and an astounding 5,000 in October this year.
- 2005
This was the year that the big brothers of the Indian business world – the Ambani duo – arrived at a settlement. The market responded with delight and crossed 7000 points as a direct response to this according to most experts.
- 2010
The market made leaps and bounds closing at over 21,000 points during this year for the very first time.
- 2014 x 2
After 2010’s Sensex long jump feat, things remained rather stable for the next few years. Then in 2014, the market leaped forward once again first to 25,000 points and then on to 26,000 points. Experts reckon that people were counting on the budget being a big booster to the economy and industry.
- 2015
Positive reform always has the best effect on the stock market – stock prices will typically rise after an announcement that the public views positively. When the RBI had slashed repo rates, the Sensex rose to 30,000 points.
- 2019
Barely four years later, the stock market crossed 40,000 points. After that… well along came a virus! That brings us to the next phase of our little walk down memory lane.
When the market crashed
Warning: This section is possibly going to make you feel the reverse of whatever you felt in the last section.
But worry not, because like we said at the start, the market is cyclic. The dips came – and went too.
- 1992
We talked about four rallies in 1992. And you know what they say about things that seem too good to be true. This year is also famous for the Harshad Mehta stock manipulation scam. This caused the market to fall 72%! The largest drop in history.
- 2004
This year too, it was a scam of sorts that sent the market plummeting by 842 points – an institutional investor called UBS of foreign origin was found to be carrying out sell orders on behalf of clients who were unidentified.
- 2007
This Sensex crash would last all the way until 2009 the global recession reared its ugly head in 2008, disallowing the Sensex from climbing back up. Throughout 2007, before the recession was official, the Sensex registered regular crashes … always over 600 points.
- 2015
In January, the Sensex declined by 854 points. It seemed like the worst had passed when in August, the market dropped by a whopping 1,624 points. That is 2500 points in a single year! A slowdown in Chinese markets was blamed by some experts for this crash.
- 2016
The Sensex crashed about 1600 points – although it was over 4 sessions, not one – in this year. However, this is probably not as bad as one would have expected considering that there was a lot going on including rising NPAs in the country’s banking landscape and demonetization (which meant there was a lot of selling as people’s ‘hard money’ or ‘black money or ‘liquid cash’ - whatever euphemism you prefer – was out of bounds which meant they began dumping stock)
- 2020
The world was terrified of another global economic meltdown as this generation experienced its first-ever pandemic. Of course, the Sensex crashed. Badly! By nearly 2000 points. And we’ve only got Covid-19 to credit for this record crash.
- 2021
Earlier this month, the Sensex crashed 1500 points – we don’t need to tell you why, especially because all stocks but Pharma seemed to be suffering. Thanks again Covid-19, this one’s (also) on you.
If you want to begin your investing journey to make the most of the stock market rallies, you can begin your investing journey with Angel Broking. Remember that anyone can invest irrespective of age, gender or occupation. But you must do your research by using all the investor education channels available to you (such as this blog page), never lose sight of the presence of risk and always invest with spare capital.
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