Stock market squid game: Nifty 50 tanks 16% from record high. 5 triggers to look at before value buying | Stock Market News

Stock market squid game: Amid the bloodbath in the stock market, Dalal Street is witnessing sharp selling across indices and segments. After climbing to a record high of 26,277.35 on 26 September 2024, the Nifty 50 index has remained under the sell-off heat for nearly five months. On Friday last week, the 50-stock index closed at 22,124 after recording its steepest intraday loss in the percentage term since 3 October 2024. The frontline index has fallen 4,153 points or around 16 per cent from the record high in this participatory selling. The BSE Sensex finished at 73,198 last Friday, recording 12,780 points or 15 per cent crash from record high. The Bank Nifty index ended at 48,344, logging a nearly 11.20 per cent dip from the record high of 54,467.

Selling in the broader market is more profound as the BSE Mid-cap index has nosedived over 22 per cent against its record high, while the BSE Small-cap index crashed around 25.50 per cent from its lifetime high. As it is difficult to time the market, the stock market’s squid game is expected to take centre stage when the Indian stock market resumes trade activity on Monday. While retail investors are busy calculating the greed and fear factors involved in bottom fishing at current levels, some experts suggest looking at critical triggers that may help them accumulate stocks at discounted levels after the stock market crash. They said promoters’ activity, trade volume trends, upcoming company earnings buzz, market valuations, and retail participation are essential triggers that signal the market’s mood at the bottom.

Here, we explain how the top 5 triggers signal the stock market’s squid game around the bottom fishing decision.

Stock market bottom: Top 5 triggers

1] Prommoters’ activity: “In a stock market crash, especially in India, the trigger comes from the FIIs, and it is followed by the company promoters, especially in small-caps and mid-caps. However, in the case of bottom fishing, the trigger comes from the promoters, which establishes the faith of FIIs. In the current stock market crash, FIIs are still selling, while there is no sign of promoters raising stakes in their company. This means there is still some possibility for correction in the Indian stock market, and the Nifty 50 index may try to test its current support at the 21,800 mark,” said Anshul Jain, Head of Research at Lakshmishree Investment and Securities.

2] Trade volume: “In a bull market, a trade spurt in trade volume is a common phenomenon. However, it starts nosediving once the sharp selling triggers. Similarly, trade volume starts ascending when the market comes to its fair value. This starts with the large-cap stocks, followed by mid-cap, small-cap and micro-cap stocks. In current markets, there is no sign of a rise in the trade volume. So, this second factor also does not give any positive signal for trend reversal in the Indian stock market,” said Mahesh M Ojha, AVP — Research at Hensex Securities.

3] Buzz around upcoming company earnings: “India’s corporate earnings in the 3Q was dismal with only mid-single digit growth for NSE 500 companies at the aggregate level. This led to a large number of earnings downgrades for the forward year. Investors should watch out for the 4QFY25 earnings growth and subsequent management commentary to gauge the confidence level of the businesses in the upcoming quarters,” said Mohit Khanna, CFP — Fund Manager at Purnartha Investment Advisors.

“There is a buzz in the market that the credit growth of Indian banks has decreased by nearly 11 per cent, which signals weak Q4 results for the banking sector. If this happens, then even RBI’s rate cut move won’t be enough to inject liquidity into the markets,” said Avinash Gorakshkar of Profitmart Securities.

4] Market valuations: “When the Nifty 50 PE ratio significantly exceeds its historical average, stocks tend to be overvalued relative to their earnings. Historically, corrections have followed periods of stretched valuations. For example 2008, following the financial crisis, the Nifty 50 traded at a PE of 12.29, signaling undervaluation and a strong buying opportunity. Investors should compare current PE ratios with historical levels to determine whether the market is overpriced or offering value,” said Gaurav Goel, Founder & Director of Fynocrat Technologies.

“Even in a declining market, not all stocks are undervalued. Investors should focus on PE ratios and earnings potential before accumulating positions. Instead of unthinkingly investing in the overall market, identifying individual stocks with strong fundamentals trading at reasonable valuations is a better approach. Stocks with PE ratios between 10 and 15 may offer better value, but thorough research is essential,” Gaurab Goel added.

5] Retail participation: “A surge driven by FOMO (Fear of Missing Out) is another crucial signal that you can’t afford to miss out. The rise in active demat accounts and mutual funds’ SIP contributions are some important variables that inform about the rising retail participation in upcoming sessions,” said Gaurav Goel of Fynocrat Technologies.

On how to find a quality share after the stock market crash, Akriti Mehrotra, Research Analyst at StoxBox, said, “A company’s fundamentals, like earnings growth, debt levels, and competitive positioning, are key to assessing whether individual stocks or sectors can withstand economic and global pressure. Companies with strong balance sheets, sustainable earnings growth, and a competitive edge in their sector are more likely to survive the market volatility and offer attractive returns from a long-term perspective.”

Unveiling how to find a value pick amid falling markets, Gaurav Goel said, “The Nifty 50 PE ratio is a reliable indicator of market overvaluation or undervaluation. Similarly, recognizing signs like excessive retail participation can help investors avoid bad entry points. By maintaining discipline and following a staggered investment strategy, investors can navigate falling markets wisely—acquiring quality stocks at reasonable prices while avoiding common pitfalls.”

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.