Are We At The Cusp Of A Major Multi Year Bull

Kunal Bothra, head of advisory at LKP Securities believes there are enough reasons for a multi-year uptrend in the stock markets in India

Most of us spend too much time in the last 24 hours rather than the last so many years. However, when you want to unravel the paths to the future or project it, the only point of reference you have is history.

Start of the year 2016, world witnessed fear gripping the minds of investors, and lot of the unknown getting known. Let’s put some key historical global factors into perspective to understand some parts of this intriguing jigsaw puzzle.

One of the key reasons, why I believe, we need to look at the globe first, and then put into context Indian market scenario is because, in 2015 the global economies were completely desynchronised. Europe struggled to grow with many parts still in recession, China till 2015 wasn’t able to accelerate its growth rate since 2008 forget about sustaining it. The United States growth gave some hope to the global economy that maybe; just maybe the giant is waking up gradually. Japan, was already in deep recession. Fed taking out the QE3, which means a lot of the liquidity based life support for emerging markets was withdrawn, etc.

In a nutshell, what we have witnessed then was that the major economic centers of the world were completely out of synch with each other not just statistically but also structurally.

This desynchronisation could probably give you an understanding, why even after the RBI started its series of surprise rate cuts early 2015 the Indian markets started to crack and could not sustain. The entire theme of Liquidity driving the markets which has been the key since the uptrend started in 2014 was in question.

In this confounding environment, let me try to show something, which would bring about some level of calmness in this storm, and a sense that all is not random, at least in the LONG TERM. Remember, There is always a pattern hidden somewhere and understanding the long term trend generally helps in better decision making.

The basic rules of technical analysis, or more aptly, market analysis are price and volume.

However, one of the third dimension to this market dynamics is the key element. It is extremely difficult to predict it, as only a few indicators have the strength to provide insight into the time dimension.

One such indicator which supports in identifying the time dimension is the Fibonacci number series.

Now, let’s not get into the debate whether the Fibo series is valid or not… We will answer that maybe later… but the topic on hand is more intriguing.

For basics, the number series starts from 0 and 1, and the subsequent numbers are derived if you sum the last two numbers in the sequence. Hence the sequence would be 0,1,1,2,3,5,8,13,21,34,55…..and so on.

In one of my most amazing observations, I have happened to observe something peculiar about this numerical pattern in Indian indices. It’s the key index Nifty.

·         Nifty long term chart indicating a movement in sync with the Fibonacci numbers.

·         If this is true than the major bottom for the 8 year sideways market could happen in 2016.

·         It also indicates that we could be headed towards a 13- year MEGA BULL Market of our lifetimes.

·         It’s not the Fibonacci numbers itself that is important, it’s the relationship between them that matters.