Year Ender: Major market crash in the offing, warns Rohit Srivastava, chief strategist, Indiacharts

Current bear market is a preceding phase of the 10 year bull run ahead. History shows we got an eight year long bull market after seven years of consolidation till 1998 and the crash of 2000. Similarly, between 2010-2020 we saw consolidation in sectors such as power, capital goods, metals, oil and gas, of which we are in the final phase. The US liquidity-infused bubble that continued in 2022 is likely to end with a major crash in 2023.

In a bull market, everything rallies and in a bear market, only the select stocks are being pushed up. If you leave aside select Nifty stocks, the rest of them are 30 to 50 per cent below their highs. The change from 1998 to now is that around 80 per cent of the trading is in the derivatives options space, which played a role in keeping the markets inflated while the broader market stocks had given up.

Nifty may have formed a double top pattern with the recent high of 18,887 this year after the previous high of 18,604 in 2021. A reversal from here can take Nifty to 15,200. The Nifty 500 index, which signifies broad markets, did not surpass the October 2021 highs despite a spike in the volumes similar to last year. It simply means broader markets are refusing to go up.

Keep your eyes on the US Fed. When the Fed recognises there is a deep economic recession, it will pivot and start cutting interest rates. Hence, when the Fed announces a recession, the markets will see the final big sell-off due to panic. But actually, the recovery cycle would start then as the Fed would be embarking on a journey to many rate cuts. In India too, the interest rate cycle has to play out. First, the RBI will have to hike rates aggressively as the rupee goes into a free fall and only then it can cut rates to stimulate the economy. All this will play out in the first half of 2023.