Japanese Blood Bath!

Japanese Blood Bath!

Recently, the Japanese market experienced a significant correction. The Nikkei 225 index, which bottomed at around 16,000 during the Covid-19 pandemic, surged to nearly 30,000 by 2021 and 2022. It then fluctuated between 28,000 and 30,000 before rapidly climbing to 42,000. However, this growth was followed by a sharp decline, dropping to 31,458 in just two weeks—a 25% decrease from its peak.

Comparing with the Indian Market

To put this into perspective, a 25% drop in the Indian market’s Nifty index would mean falling from 25,000 to around 18,000. Despite the severe drop in the Japanese market, the Indian market remains relatively insulated so far. Each market has its unique challenges, and we will explore the issues facing the Japanese market in more detail later.

A Severe Global Corrective Move

This sharp correction resembles the market crash of 1987 that affected both the US and Japanese markets. The repercussions of this fall are being felt globally, with markets in Hong Kong, Asia, and Europe also experiencing declines. The tech sector in the US has been hit particularly hard. This sudden loss of confidence in the market is evident, and we can only hope for a quick recovery.

Market Dynamics: Sharp Falls and Recovery

Market declines are typically abrupt and steep rather than gradual. When a market falls, it often feels like it’s falling off a cliff. This is due to the imbalance between supply and demand—currently, there is more supply than demand. However, there will come a point when demand will once again overpower supply, leading to a base formation.

Watching the Japanese Market

The Japanese market plays a crucial role as a leading indicator. As soon as the Japanese market begins to stabilize and turn around, we can expect to see some base formation in other markets as well. It is essential to keep a close eye on the Japanese market to understand where short-term market movements might be headed.

Check out the detailed video on the WeekendInvesting App