2013 August was a period of total turmoil for Indian financial market. India was part of Fragile 5 countries. INR was in free fall mode and Indian stock market too under complete bearish grip. It was a period of total darkness. But winds of change were visible. Two major players emerged in August-September 2013: 1. Raghuram Rajan as new RBI Governor; 2. Narendra Modi as BJP PM candidate.
Formation of Bottom in last two weeks of August 2013
As a reaction, Market did something remarkeable in last two weeks of August. It sold off but then made a violent pullback and closed above 100 week ma for two consecutive weeks. It was a clear sign of bottom. And as you can see in the chart below: it turned out to be a GREAT BOTTOM. Nifty managed an impressive rally from that lows.
Nifty Breakout to NEW HIGH in March 2014
Nifty made a high around 6354 in January 2008. It then touched that high back in Nov 2010. It then took another 3 years 4 months to clear the resistance. Nifty broke out above 6354 in first week of March 2014 in anticipation of Modi victory
The Breakout at index level is always considered as a significant event.
Nifty continued with its rally post Modi victory
The breakout in Nifty resulted in strong momentum move and Nifty continued with its bull run and peaked at around 9000 in March 2015...just post budget.
It was a rally of 41% at index level from March 2014 to March 2015. From Bottom formed in August 2013 - it was a rally of 64.5%. It's quite fascinating that USDINR was at 65.7 by August 30 2013 and USDINR is now trading at around same levels
What's happening right now: Nifty taking rest/ Consolidating Gains
Markets don't go up in straight line. They go up making certain assumption and then wait for evidence/results before making another set of bullish assmuptions. Nifty after a huge run was expected to consolidate. Technically, you can call it formation of a base camp before making the next move with base near 7970
In very near term - Nifty seems to be circling in a tight range
Road Ahead for Nifty
Trust the Trend. Nifty is in Bull market and hence eventually it will head higher. Nifty now has a solid base at 7960 and as long as it holds that level - one should assume strong bullish days ahead. In near term - Nifty is circling between 8320 and 8650 and any breakout in either direction will drive short term move. The big picture: Bullish. It's only when Nifty breaks down below 7960 - that one will have to re-evaluate the market. Right now, Nifty is in Resting mode.
If the markets were certain then there would be no markets. No one can give you a 100% guarantee of what market will do; all we know is what it can do
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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers