INDIAN PAIRS: LONG NIFTY – SHORT NSEBANK

Why do BANKS fall? This question may have many answers based on when you ask it. The question may have no meaning if it was asked at the market top at BSEBANK 12,678 (20 Jan 2008). It may evoke a shrug if asked at Oct 2008 lows (BSEBANK 3,601). Now that BSEBANK has retraced almost 61.8% of the losses from historical highs (29 Jun 2009 8,575) the answer may at best be mixed.

Performance cycles on the other hand can give an answer at all times. BANKS can underperform NIFTY, means fall against NIFTY cyclically. For example NSEBANK fell against NIFTY three times since July 2007 for an average 140 days. If you zoom in a bit more coming from weekly to daily charts, the number of times NSEBANK underperformed NIFTY or fell against NIFTY increases by a factor of three to nine times with an average time period of 46 days. There is another interesting thing that happened during this time when BANKS were underperforming NIFTY, broad markets were falling or stagnating on all the three occasions. What does this mean? This means that if we study performance cycles (TIME FRACTALS) we can not only isolate performers but we can also understand when the broad market might be ready to turn.

NSEBANK seems ready to underperform again against NIFTY. Empirically this means that chances of a broad market stagnation or negativity might be in. We have illustrated here the pair performance cycles (INTERMEDIATE and MINOR) between NIFTY and NSEBANK. Both time frames suggest an impending cycle low which could mean the end of NIFTY’s underperformance against banks. A clear turn from respective lows should see NSEBANK underperforming NIFTY for more than a few months. This also means that LONG NIFTY– SHORT NSEBANK could be an interesting pair to watch for the next 140 or 40 days. Now 140 days is a long time which takes us well into the final quarter of 2010.

Financials react fast to economic changes and hence carry clues for market perspective. This validates our overall negative view on the Indian market, which would be challenged only if prices move above the highlighted key resistances. We have carried Elliott updates on the main indices and ANTICIPATED AND HAPPENED cases on BSE REALTY and BSE POWER.

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ORPHEUS INDIA RESEARCH

WAVES.IND is a perspective product published on Tuesday and Thursday. The report highlights Indian Stock Market top sectoral Indices and Sensex (BSE 30) viz. BSEOIL, BSESC (Small Cap), BSEMC (Mid Cap), BSEHC (BSE Health Care), BSEPHARMA (Pharmaceuticals), BSECG (Capital Goods), BSEBANK (Banking), CNXIT (Technology), BSEFMCG (FMCG), BSEAUTO (Auto) etc.. The product also covers all the 30 Sensex components. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

COVERAGE: REUTERS RICS. INDICES. .BSEBANK, .BSEOIL, .NSEI, .BSECG, .BSESN, .BSEAUTO, .CNXIT, .NSEBANK, CITc1, IFc1, .NSEBANK

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