Thread by @ravijain88

In Financial markets, Exit strategy is least talked about topic but plays very important role in generating Alpha, here is a thread covering the 15 point strategy on the same with 2022 case study. Retweet for wider reach & get rewarded #StockMarket #cryptocurrency #Markets (1/n)

Equity markets goes through Greed & Fear cycle and pendulum tends to swing to the extreme with Overvaluation/ exuberance in Bull market peak and Undervaluation/ panic in Bear market #StockMarketindia #DowJones #SmallCaps (2/n)

It is very important to stay unbiased, calm and take rationale decision in all the situations. The rationale decision can be change in investing style/ strategy to conservative ( during bull market peak) or aggressive during bear marker bottom #StockMarket #cryptocurrency (3/n)

If we look back to 2022, we turned highly cautious and raised significant cash in market in Mid 2022 when BSE small cap index was 31,000. Reference (4/n)

https://twitter.com/ravijain88/status/1485488713140703236

https://twitter.com/ravijain88/status/1489293730830241794

Our decision was on account of various indicators such as
Valuation- Large cap valuation reaching cyclical high, our proprietary model which has accurately predicted various tops was indicating that small cap stocks are nearing peak #valuation #bsesmallcap (5/n)

Behavioural Finance Indicated Irrational Exuberance: 90% of the 52 week high stocks were from below 200cr market cap, 15%-20% of small cap universe was in upper circuit, ownership pattern of retail was tilting towards bhangaarcap #pennystock (6/n)

Fundamental patterns signalling Red Signals: Inflation was persisting high, early sign of Fed tightening, signs of margins shrinking, 10 year US Bond yield was approaching 2% #inflation #bonds (7/n)

Price Action: NASDAQ & Crypto market was entering bear market, providing lead indication for things to follow #NASDAQ100 #cryptocurrency #BTC #Ethereum (8/n)

Risk Reward was Not Favourable- Amidst various indicators, one clear thinking was risk reward is not favourable in ST & upside is capped in the market, while downside can be high. Thus, we raised cash on first instance of fall (9/n)

https://twitter.com/ravijain88/status/1485488713140703236

Thereafter, risks started to materialise & Market positioning went from one extreme (Assuming fed won’t pull the trigger) in Jan 2022 to another extreme ( assuming fed would be unstoppable ) within a span of 5 months . BSE Small cap index fell 30% in just of 5 months (10/n)

Market witnessed capitulation with stocks falling 15%-20% led by panic & we highlighted the same as our observations

https://twitter.com/ravijain88/status/1538803846394552320

Social media was full of pessimism all around with various articles/views being floating around for bad years ahead, recession etc (11/n)

That was the time to be greedy and we turned buyer and we highlighted the same (12/n)

https://twitter.com/ravijain88/status/1538923821784518656

https://twitter.com/ravijain88/status/1537333700811436032

Thereafter, market participants has been in denial mode and market has been surprising every one with its very fast recovery. Nifty has recovered 20% from low and small cap index has recovered 30% from bottom #nifty50 #StockMarketindia (13/n)

Thus, it is very important to chalk out a strategy / tilt aggressiveness depending upon market cycle so that you do not panic at bottom (14/n)

Now, one important point to think is path ahead, we will cover the same in a separate thread soon (15/n)

Mid Jan 2022*