Monday, September 23, 2013

Nifty: Understanding and interpreting NEWS and if it carries predictive value!

Nifty movement has been extremely volatile over past few weeks. It is a tendency of traders to search for news that justifies their stand.
A person having long position will try to search for news that justifies his stand and the person having opposite positive will search for bad news impacting the market and both of them will feel little relieved after reading the news that favors their stand. This happens with everyone and that is why news are not objective ways of trading. Let us understand the news which was going around at the top of January 2008 and the bottom near March 2009…
Some News analysis:
Following is the news that we found before the major top of January 2008:
Dun & Bradstreet: The Indian economy is one of the fastest growing in the world. Since liberalisation, it has transformed into one of the most attractive destinations for investments and businesses, backed by its abundant manpower base, varied natural resources, and strong macroeconomic fundamentals. Before the emergence of the global credit crisis in 2008, the Indian economy recorded a 9.5% CAGR over FY06-FY08. Following the crisis, it saw broadbased recovery. Due to the country’s limited dependence on external demand and strong and expansionary monetary and fiscal measures, the global financial crisis had a relatively muted effect on the economy.
Google search shows date as 15th January 2008, just 4 days prior to markets hitting lower circuit.
Now let us see what was happening in January to March 2009, just before one of the strongest uptrend:
Satyam scandal came just 2 months prior to the major bottom was formed and pessimism was at peak.
Satyam Fraud May Delay India Economic Rebound, Limit Investment
By Kartik Goyal - January 14, 2009 14:44
The loss of confidence may make it harder for Indian companies to secure borrowings from overseas to fund investment, which accounted for about one third of economic growth in the quarter to Sept. 30.“This has happened at a very crucial time when the economy is facing a slowdown,” said ShubhadaRao, an economist with Yes Bank Ltd. in Mumbai.
Investors Flee
“These sources of funding have dried up as overseas investors have fled and confidence in equity markets has evaporated,” she said.Foreign investment into India was already slowing before the Satyam revelations, as the world’s worst financial crisis since the Great Depression prompted funds to withdraw from emerging markets.
Contrary to this, the world markets formed major bottom in March 2009.
Standard & Poor’s said Feb. 24, 2009 that the nation’s credit rating may be cut to junk as government debt is reaching a level that’s “not sustainable.” S&P reduced India’s rating outlook to negative from stable.Mukherjee said the rating company’s move was “not unexpected,” adding that the global downturn “requires extraordinary steps from the government.Does this sound familiar?
The case in point is news can be very deceptive and exactly at the wrong time. We are not saying negative growth outlook, poor earnings or worse GDP data means stock market will rally but it does mean that all these parameters lack the stock market that is constantly thriving to see the future! This also gives us more perspective on the overall “Economic Cyle”.
We will touch upon this section in more detail along with the Economic cycle analysis, GDP chart, PE ratio, News analysis, etc in the forthcoming issue of monthly report – The Financial Waves Monthly update that shows long term forecasts.
The above excerpt is picked up from “The Financial Waves Short term update” that shows Elliott wave counts along with other technical analysis studies which provide one of the objective ways to look at the ongoing market action. This research report is delivered directly in your mailbox everyday morning before market opens or can be accessed from the client’s login page as well. For more information write to us at or call on +91 22 28831358 / +91 9920422202. Visit

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