Don’t tell me you were surprised by the big last two hour slide in the market. I am not and in fact, I have a proof for that. This was my call on Tuesday, the market was surging.

My gut says today is the culmination of the big rally market has seen in April and May and it won't surprise me if we end in the red today (And deep in the red for midcaps). Of course I could be wrong.

— Anuj Singhal (@_anujsinghal) May 15, 2018

What exactly do I mean by this? See, the market is smarter than all of us and it will price in an event way before you would start reacting to it. It’s plain and simple. And just like some sharp downtrends end with an event, so do some sharp rallies as well.

It has, for some time, been my call that this is a year of large caps and, while the Index has seen a big rally, there has been a lot of pain in portfolios. In fact, the midcap index is down nearly 10% this year which means high beta stocks are down way more.

There are some warning signs. For the health of the market, the most important factor for me is market breadth. That is essentially the ratio of stocks going up against ones going down, and for last many days this ratio has been favouring declines. The number of stocks hitting 52 week low on BSE is outnumbering stocks hitting 52 week high by a ratio of four to one.

Now one Swallow doesn’t a summer make. That’s the adage which will be tested on Wednesday.

Whether Tuesday was a trend reversal or an aberration, we will find out. But for me, we now have two boundaries for the Nifty. Tuesday’s high of 10,929 on the upside and series low of 10,601 on the downside. But I am very clear, the market has given you enough warnings to get into safety of large caps or even cash and get out of some of the high flying midcaps.

This isn’t 2017 and market is not going to be forgiving of big errors this year.

First Published:May 15, 2018 6:24 PM IST