Stock market crashes and leap years have a bloody history. Will 2024 pass away peacefully?
Synopsis
Some of the worst crashes in Dalal Street history have been during leap years - 1992, 2000, 2008 and 2020. The new year of 2024 is also a leap year. Will Sensex, Nifty crash this time also? Analysts don't see any reason for worry but as they say, the biggest risk is what you don't see coming.
In 2000, investors lost 21% in a global meltdown due to the dot-com bubble burst in the US.
The year 2008 was again a witness to one of the worst bloodbaths in the annals of Dalal Street when Sensex lost more than half of its value in the global financial crisis.
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The stupendous rise in Nifty, which hit another record high on the first day of the new year, has left bears without a vocal cord. But investors must not forget that most positive outcomes related to rate cuts and Lok Sabha elections have already been priced in leaving very little margin for safety.
While Kotak Institutional Equities expects a modest 1% rise in Nifty by December 2024, other brokerages have given targets going up to 23,000. The brokerage's fair value model shows the index is now close to 20% overvalued.
"Thus, we do not anticipate a large upside to the index from this point. The most likely outcome for the index in the next 6-9 month period seems to be a time correction," said Kotak's Anurag Singh.
On the technical side, Nifty charts indicate that the buying momentum may propel the index towards the 23000 to 23500 range. Since March 2020, there are six instances of 10% decline in Nifty. Each one of them was followed by an average 25% return in subsequent rallies before a correction ensued, said Rajesh Palviya of Axis Securities.
Even the study of leap years shows that there have been exceptions in 1988 and 2012.
As you get ready to splurge once again on equities, do not forget what author Morgan Housel says - Risk is what you don't see.
(Data: Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)