Relation between Infosys results, Satyam Scandal, Japan Tsunami !!!

Relation between Infosys results, Satyam Scandal, Japan Tsunami !!!

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 12^th 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 10^th 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 17^th 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

Japan’s Tsunami: One of the biggest act of Natural Disaster in history of Japan!

Nikkei 225

Nikkei 225 Index:

Japan recorded the worse Earthquake ever in its history and this is no good signs from the nature. We believe each act of human on this planet is governed by nature and we do what we do in a rhythmic manner. Human beings as a whole in crowd cancel out random movements and what is left is a pure game of psychology in markets. We thought of showing one of the leading Japanese index – Nikkei 225 that shows how the economy as a whole has been doing in Japan. Japan’s equity markets closed at the day’s low when the terror struck its shores. The above chart shows that we were already due for a major correction to the least or resumption of a big downfall that started in 2007. The entire move down in 2007 – 2008 was impulsive 5 waves down and we corrected up in a complex W-X-Y correction as shown. We think the pattern is clear and we have started with a big down fall in Japanese market with recent natural disaster just acting as a trigger / catalyst to this fall. It has struck Japan at the time when markets were just about to turn down. Now this disaster will be blamed for the downfall in equity markets. It does has washed away millions of dollars’ worth of resources but we study history and know that over long term basis an act of disaster either natural or by human’s act actually stimulates the economy in a few years’ time.

Japan is what it is today due to the bombing on Hiroshima and Nagasaki during World War II. They fought back strongly after the terror and became one of the strongest economies of the world.

We remain strongly bullish over long term on Japan with some correction due over a medium term horizon. We are going to see this economy booming back to the way up to the levels it has not seen before.

Japan has a history with itself about their attitude towards disaster and they have all that it takes to come out of it. This disaster has created space for their developed economy and government can now spend on infrastructure ( Government was spending to stimulate the economy by the way of concreting the beds of sea shore since there was nothing to spend upon before) which will be most required once things settle down.

We strongly believe in Japanese people and in their attitude to fight back the disasters! They will come back strongly in a few years’ time when Japan will be completing its worse downfall that started in 1989 and overcoming the worst natural disaster that struck them!