By Waves Strategy Advisors, For information on various research reports visit www.wavesstrategy.com or write to helpdesk@wavesstrategy.com
Infosys results were declared on 12th April 2013.
Infosys fourth quarter net profit rose 3 percent year-on-year (1 percent quarter-on-quarter) to Rs 2,394 crore, helped by higher other income and lower income tax expenses. The stock had a gap down opening of nearly 15%. Nifty on that day was down by 80 points and 75 points was due to Infosys. Nifty made a low of 5494 on that day but failed to breach its previous low of 5477 which was made on 10th April 2013. Markets managed to protect the lows and started rallying from very next day as shown in below chart!
Nifty daily chart: Last updated 17th April 2013
Satyam Scandal - Nifty daily chart 2008 - 2009
Satyam Scandal: A very similar event occurred 4 years back when we came across the SatyamScandal. The Scandal came in early 2009 where IT major Satyam Computer Services’s explosive revelations send the market on a southward spiral. Satyam’s shares plunged 77.69% in a single trading session on 7 January 2009, as chairman Ramalinga Raju resigned after announcing during trading hours that the company’s accounts were inflated. The shocking revelation of the accounting fraud, estimated at about Rs 7000 crore, sent the BSE 30-share Sensex tumbling 7.25% on that day. Interestingly in this case, again Indian markets managed to protect its previous low of 2008 and later started the uptrend.
Nikkei 225 (Japan) daily chart 2008 - 2009
Japan experienced one of the worst Tsunami and earthquake in 2011. The equity index of Japan Nikkei 225 clearly shows reaction to the event. In this case as well event did create lows but later market immediately reversed and resumed the original direction protecting the lows created.
Case in point: We believe that event does not determine the direction of the market but can produce only short term spikes that can last from few minutes to hours to few days but the original trend eventually resumes. Also a common thing betweenInfosys andSatyam is that both the events resulted in down move but that managed to protect the immediately preceding pivot lows. In case of Japan, equity markets quickly recovered after the event and prices rallied back towards the level before the event and then resumed its original trend.
It is therefore important not to trade based on news or event as they will be opposite exactly at the wrong time. Even this time Infosys results turned most of the people bearish exactly when we expected an important short term lows in Indian markets.
Do not get carried away by news but apply Elliott wave patterns and technical studies that helps us to be objective and trade in correct direction of the trend. Our daily research reports on Equity, Commodity and Currency markets provides detailed technical charts and explanation that justifies our stand objectively!!!
By Waves Strategy Advisors, For information on various research reports visit www.wavesstrategy.com or write to helpdesk@wavesstrategy.com
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