Rajandran R Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

Political Shocks and Market Crashes: Lessons from Argentina for Indian Investors

1 min read

In an unexpected turn of events, the Indian stock market experienced a dramatic crash today following the announcement of the Lok Sabha election results. Despite the NDA securing over 292 seats, surpassing the majority mark of 272, the markets reacted violently, with the Nifty plunging by 1379 points and experiencing intraday volatility of 1906 points. The India VIX spiked by 27.75%, reflecting the heightened uncertainty and fear among investors. This drastic reaction raises the question: Are Indian markets entering a period of short-term turmoil, or is there a long-term opportunity hidden beneath the chaos?

To draw parallels, let’s revisit a similar episode in Argentina in 2019. On August 9, 2019, the Argentine stock market closed at an all-time high, only to crash by 37.93% in the next trading session following a surprise primary election result. President Mauricio Macri’s unexpected poor performance in the elections led to a massive sell-off. The main Argentine stock market fell 35%, and the peso lost 25% of its value against the U.S. dollar. This sharp decline was one of the most significant single-day drops in global market history.

Initially, this crash seemed like the beginning of a prolonged bear market. However, the reality turned out to be different. The sentiment-driven sell-off caused a short-term structural damage, but the market’s recovery was swift. By examining the S&P Merval Index (IMV Merval), we see that despite the 41.49% crash in August 2019, the market rebounded quickly. The subsequent months saw the lows being retested, particularly during the COVID-19 crash in March 2020, but the market did not spiral into a long-term decline.

Fast forward to today, the S&P Merval Index stands at a staggering 1,577,241. This exponential rise highlights the potential for significant wealth accumulation over the long term, despite the initial shock and volatility. Investors who stayed the course and weathered the short-term storm reaped substantial rewards.

This historical perspective offers valuable insights for Indian investors. The current market crash, triggered by the surprise election results, mirrors the Argentine experience. While the immediate reaction is one of fear and uncertainty, the long-term outlook might be far more optimistic. The structural integrity of the Indian economy, combined with strong political leadership, suggests that this crash could be a short-term anomaly rather than a prolonged downturn.

As the opposition leaders of the INDIA bloc strategize their next moves, the market will remain volatile. However, if history is any guide, the underlying strength of the Indian market could turn this crisis into an opportunity for savvy investors.

In conclusion, while the political crisis and market crash in Argentina offer a stark reminder of the volatility inherent in emerging markets, they also provide a blueprint for navigating such turbulence. Indian investors should take heed of these lessons and consider the long-term potential, despite the short-term pain. As the saying goes, “This too shall pass,” and those who stay invested could find themselves in a position to benefit from the eventual recovery.

Rajandran R Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

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