Ready To Swing Upwards

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I think the global problem is here to stay. That’s almost common knowledge and apart from this, we might see cycles with upward movements showing temporary improvement as also the downward spirals. At the global level, the time projections which are being made by Elliott Wave International are probably the most accurate and these range between 2013 and 2016 for a significant possibility of bottoming out. But in the interim period, like I said, we will have several cycles which implies that right now we have had a year’s downturn and probably we are at the beginning of an upward movement in the markets.

During this rise from the trough, it is quite possible that India will bounce back with greater strength. However, the global financial crisis will continue to have an impact especially in terms of exports which is facing a severe crunch. India will still be able to shrug off the effects of the bear market or at least a part of it. My opinion is that the downside swing is phasing out and things can only get better from now on. Over the next few months, certain sectors like financials, telecom, metals and probably capital goods and oil and gas. Most of this is the technical calls and in technicals, we strongly use the Elliott Wave Analysis which applies at various time degree.

Various time degrees implies that every bull market breaks up into a five wave pattern and even every bullish trend in the short-term breaks up into a similar five-wave pattern. So when we study this pattern with a long-term view, there are certain sectors and stocks where the 5th wave on the upside is still pending and that’s where the bullish cycle comes from. Further, when we talk about the stimulus package announced by the government, the theory of technical analysis looks at it from the social psychology point of view which says that it is not news and events that drive the markets but it is the market condition which is actually a reflection of the social state of people that leads to events.

But what the charts suggests is that we have been into an accumulation period for almost two months now and it is time for the effects of the stimuli to show up. This will happen over the next two to three months. Meanwhile, when the relative rupee – which means rupee in terms of the US dollar index – starts shooting up, it can be considered as a warning of a rise in inflation due to external price factors. Currently, the relative rupee has been flat for the last three to four months and hence there isn’t any sign of an inflation risk.

At Sharekhan Protech, the focus is on giving long-term consistent returns based on the long-short managed futures account. This means that when the markets are falling or rising the fund is designed to benefit from both the circumstances. This turns out to be ideal in a volatile market where the swing will be in both the directions. As of now, investors should look at value investing over long-term periods and take into consideration sectors like power, banking and telecom but avoid over-leveraged sectors such as real estate.