What is your understanding? Do you think the collateral damage is done, has the storm come and gone or this is just the tip of the iceberg?
I have been talking about that 2023 will be very challenging. When I say challenging, it means we have talked about that it will be more volatile than 2022, because that is the last year of our volatility expansion thesis, which started in 2018 till 2023. Now with this background, let us understand the larger picture. A lot of people are very worried. We have seen a long-term top and this is now a sell-on-rallies market. Let me address that. If you recollect when market made a new low in June 2022, I talked about that you will see all-time high as early in the current calendar year, that was 2022 because I talked about there was no characteristic which is required for a market top that was not fulfilled.
Market typically peaks out with some amount of euphoria, which has not happened so far. So similarly, if I have to look at 2023 now, yes, it will be volatile, but if we can say with good amount of confidence, the top is in place, so answer is big no because the characteristic from a behaviour perspective, what we look at from various conditions and euphoria, which has happened across all the Street has not happened, which means that if I have to look at larger perspective, you will see again all-time high as early as maybe in the last quarter of 2023 or maybe beginning of first half of 2024.
So that gives a bigger perspective that we have not seen the long-term top, which most of the investors and market intermediaries are worried about. This is what we can see from a predictive analytic thesis, and this is what our models are suggesting that long-term top is not in place.
Now let us look at the current situation from a very near-term perspective as well as medium-term perspective. Now, if I have to talk about from a very near-term perspective, yes, we have seen good amount of capitulative move happening in banking sector, maybe in the broader market also, but we have to keep in mind a lot of people are looking at the derivative data because VIX has not spiked in this entire fall except maybe last few days. A lot of people are looking at the leveraged position data, but you have to see that overall leverage activities are significantly down, and you will not get meaningful clues just by looking at the derivative data. This selling has been largely driven by delivery-based more coming from the ETF or the passive fund side, and if you look at the overall impact cost has risen significantly from the month of January 2023, which means on low volumes markets having a bigger impact. Small buying or selling can lead to bigger movements in the market.
With that background, if I have to look at, maybe you can see a capitulative move has already happened or maybe happening in a day or two in some of these broader markets or banking sector that becomes a buying opportunity. But if you ask me, even from the Nifty perspective, we have seen fear index spiking. The quant fear index has spiked, but has not spiked up to that extent what is required for a perfect bottom.
Maybe I visualise a small scenario what happened in May 2000 and June 2022, where you saw a deep correction in the month of May, and then you saw right from February to May, it was a meaningful correction and small rebound and again correction in June. That could be a possibility which looks like that you might see a bottom formation now.
That is the broader setup if I have to look at, but if you look at simultaneously in the market, look at the value thesis which is playing out. When you say that we are not done with the selling, we are at about 17,000 on the index plus minus 100 points. The 2022 low is still a distance away. So are you making a case that we can go back to the 2022 lows?
For us it is very difficult to pinpoint that given the Indian macro, I do not think we are approaching there. And maybe 16,000 certain level, maybe 16,800, 16,300, maybe a lot of chartists can give a better answer than me on that aspect. But I think only from a macro perspective, things are not that bad as market people are looking at.
That is the reason I am looking at more from a near term problems or medium term issues, but long term perspective, I think India remains buy on dip.
In today’s context, when I say 2023 will be volatile, the way we have restructured our portfolio, the safety is first,
liquidity is secondary and returns are third in that order. So that way we are looking at the market because if you manage next few months, I have said, I have been saying for a while, if you manage 2023, I think from a medium term investor and long term investor, I think it is a great opportunity to build exposure.