Friday, January 4, 2013

Do stocks really move independent to major indices??


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It is normally believed that FMCG and Healthcare stocks move independent to major indices or broader markets as their sales are not much impacted by economic boom or recession. 
It is also believed that FMCG and Healthcare are defensive sectors and tend to outperform markets during recessionary periods. We do agree to this statement but outperformance does not necessarily mean positive returns. Outperformance can still result into negative returns!
We have analyzed Nifty and Health Care index. A close observation shows that the correlations are actually very high during turning points i.e. There have been occasions where a major turn in Nifty resulted in turn in Health Care index infact to the same point of time. 
The below chart shows HealthCare stock Ranabaxy compared to Nifty. The below chart needs little explanation and clearly indicates the high correlation that has existed between them since the fall started in 2008.

There are many other perceptions and myths that people believe into as it sounds logical. But trust me not all logical explanations will make sense when you spend little time to evaluate the notion objectively by looking at the charts.
Charts & technical tools like Elliott waves provide an objective reasoning and helps us to take systematic decisions rather than acting on convictions or perceptions or beliefs!
To view the technical research report that gives objective explanations write to us at helpdesk@wavesstrategy.com

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