Tuesday, October 29, 2013

Nifty Trading Strategy post RBI policy announcement!

In today’s policy meet RBI increases repo rate by 25 bps and cuts MSF by 25 bps.
After taking the governor position Mr. Rajan has increased the key policy repo rate by 50bps in total. Many thinks that the policy announcement decides the trend of the market but that is not necessary. There are times when market reacts to favorable news positively and at times it moves exactly opposite to the expected positive outcome. The reason being that the events do not change the trend of the market but only produces short term spikes that last from few minutes to hours or days but the original trend later on resumes. Elliott wave principle – an advanced technical analysis concept helps to understand this trend and provide forecasting ability.
Have a look at the below chart and try to forecast Nifty using only Interest rate cycle. Infact, if you observe markets have gone up after the repo rate hike on both of the instances.
 The above chart clearly shows interest rates do not decide the major trend of the market but nevertheless it plays a vital role in providing information from Economic analysis perspective. An interest rate cycle tops out before the major bottom is formed in Equity markets. There is much more to this chart about Economic cycle analysis.
In our forthcoming issue “The Financial Waves Monthly Update” we will be giving a very details observation on what we see on above charts without using any other technical indicators. It is simply prices and Interest rates that can also provide vital information as to the major trend of the market. For pricing structure visit Subscription or Contact US!

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