Indian Equity markets have been correcting post the high made at 9119 in month of March 2015, last year. This high was also made after the slower pace of rally post the election outcome in May 2014.
Shanghai Composite Index (China Equity market) topped out in June 2015 which was almost 4 months after the high made by Nifty. Also developed markets have relatively outperformed India over the entire period and did not show much of price correction but more of time correction.
The easiest way to explain a fall in markets and attribute the losses is to blame Global events as it is most convenient thing but only after the move has happened. I distinctly remember the extreme optimism during the Budget time of 2014 when Crude was already in downtrend and the widespread euphoria was fall in commodity prices will provide upper hand to India and reduce the deficit drastically. However, during that time we came out loud and bold that Global economies are headed towards the Commodity crises and fall in prices also indicate slowdown in demand. It was then in early 2015 that we warned about impending downtrend in India and the extreme optimisim is about to fade out equally fast.
Now we are here and people are looking back and started blaming China for the selloff but for an investor or a trader it is simply providing a comfort value but carries no importance from Investment or trading perspective.
Case in point: It is time to stop finding out reasons for the correction but to use objective techniques that can help us forecasts the future and take the right action in timely manner. We think that the correction that started last year is now in its matured stage and we are now headed for one of the very strong rise that can be witnessed.
Trust me news will change drastically after the rise has happened and might look something like this – “Lower Crude prices help India to reduce the deficit and provide much needed boost. Corporate profits to improve drastically given fall in interest rates and reduced commodity prices. Inflation is within the comfort zone and RBI governor will be accommodative to ensure fast recovery in economy.”
Now coming back to the method we think is an objective way to forecast the future trend – Elliott wave and Time cycles
Nifty daily chart (India) compared to Shanghai Composite (China)
There are certain things that work extremely well in markets but might be difficult to digest. Everything is governed by cycles and so is stock market. There are instances when the turn in prices has happened exactly on the cycle day and we have our records marked on charts to prove its importance. These things are not random and that is why we see Channels, Fibonacci ratios, Elliott wave patterns, et al working again and again and have stood the test of time for providing forecasting ability.
It is time to stop blaming the events or China for that matter and use the objective techniques to forecast the future trend. We are headed for some golden era and yes, I might be off by a few months if it is not immediate but it is worth the chance given the extreme pessimism amongst crowd which is typical during major reversals. Check the news back in August 2013 just before the major rally started and you will find all the logical explanation why it was not the time to enter the markets given the uncertainty of central elections in 2014.
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